Money market analysts have described the double-bond auction as the second phase of the sterilisation process to set off the inflows of Resurgent India Bonds (RIB) proceeds. In the first phase -- between August 21 and August 24 -- the RBI had mopped up Rs 4,650 crore through open-market operations (OMOs). Subsequently, the RBI collected Rs 500 crore through OMOs while another Rs 4,000 will be sterilised through the Rs 4,000 crore issue.

This effectively means that the State Bank and the RBI have swapped $2 billion in off-market deals to bring in the RIB proceeds. The RIBs collected $4.16 billion between August 5 and 21.

The RBI said that it has reduced themonetised deficit through the OMOs. The RBI has made net open-market sales to the tune of Rs 8,448 crore between April and August.

A central bank press release on Wednesday said that the net RBI credit to the centre has been reduced from its peak level of Rs 21,789 crore on July 10 to Rs 6,163 crore on August 28 showing a reduction of Rs 15,626 crore. "The increase in RBI holding of GoI securities during the current financial year has come down from a high of Rs 11,690 crore on July 24 to Rs 5,469 crore on August 28," it said.

The sale of government securities held by the RBI in the open market is in line with the RBI's policy statement on June 11 that said that "it will phase out government borrowing programme in a manner so that it has least adverse effects on long-term interest rates. In order to do so, the RBI will be prepared to accept private placement of securities from time to time and then release them to the market gradually."

Dealers said that they were unable to take a position on the papersbut there is a possibility that both the papers are likely to go through without any devolvement on the RBI or primary dealers.

The 10-year paper is expected to see a coupon of 12.15-12.18 per cent while the six-year paper may have a coupon of 11.90-95 per cent, dealers said. The last security sold by the RBI in the primary market was the 12.14 per cent 15-year paper which drew a lukewarm response and garnered Rs 1,192 crore.