MUMBAI, Aug 11: The Reserve Bank of India on Monday lowered the coupon on eight-year government bonds to 11.19 per cent. Speculators who thought they could make a killing were in for a big surprise as the new bonds failed to evoke buying interest as anticipated, money market dealers said.

The entire Rs 3,000 crore notified at the auction was fully subscribed. The Reserve Bank received 466 bids in all worth Rs 9,844.34 crore, but accepted only 87 bids for the notified amount.

The new bonds, in off-market deals, traded at a 35-paise premium over its par value of Rs 100, but deals were few as sellers soon jacked up their rates by another 10 paise, a broker said.

The sellers of the new bonds also received a jolt when a few speculators began selling the 12.59-per cent, 2004 bonds at Rs 107 in off-market deals. These sellers earlier sold the same bonds at Rs 107.05. The selling of 12.59-per cent bonds reduced active (speculative) trading on the new bonds.

Meanwhile, on the National Stock Exchange, there was hectic trading in the 12.59-per cent bonds. The bonds jumped by 50 paise and traded at Rs 106.82 shortly before the exchange closed.

The bonds accounted for nearly 50 per cent of the total trades transacted at the exchange on Monday. However, in off-market deals, specualtors sold the same bonds and made a quick buck before the Reserve Bank announced the new bond auction results at around 7.40 pm and brought speculative activity to a standstill, a dealer at a brokerage said.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.