MUMBAI, July 10: The Reserve Bank of India will auction six year government bonds totalling Rs 3,000 crore on Wednesday.

According to RBI, the bonds will be eligible for ready forward facility and payment by successful bidders will be on the following day.

Most dealers expect the RBI to award the coupon between 12.15 and 12.25 per cent. Market analysts, however, declined to comment on the coupon saying that it was too ``premature'' to predict rate. The announcement, however, put to rest market gossip that the government will come out with long-dated bonds of 10 years maturity and above. The market has been expecting a bond auction because of the easy liquidity conditions prevailing in the market.

With the interbank call rate hovering around 1.25 per cent, market players shifted their focus to the secondary bond market where prices have been soaring due to sustained buying. Among the actively traded bonds were the 12.59-per cent, 2004. But the prices of this bonds fell today after the RBI announced the new bond auction late afternoon.

The announcement caused a downward pressure on the prices across-the-board today affecting the 12.59-per cent bonds, the most, dealers said. The prices fell from a high of Rs 101.47 to Rs 101.30 no sooner the announcement of the new bond auction was made, a dealer at a brokerage said. But dealers said the fall in prices today was mainly due to panic created by a few players. Most dealers now expect the prices to revert back to original levels on Friday.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.