For the six-year paper, the cut-off yield was pegged at 11.98 per cent and for the 10-year paper at 12.25 per cent. The market was expecting a cut-off rate of 11.85-95 per cent for the six-year paper and 12.15-18 per cent for the 10-year paper.

With the completion of the twin-bonds auction, the centre now has to borrow the remaining amount of Rs 19,635 crore from the market to meet the gross borrowing programme of Rs 79,000 crore for fiscal 1998-99.

The market showed little interest in both medium- and long-term papers, which is evident from the fact that the central bank mopped up Rs 5,065 crore through its three-day fixed-rate repos,sources said.

"This shows that despite comfortable liquidity in the system, the market is not willing to subscribe to medium- and long-term instruments at higher rates. At present, market players prefer to lock funds in short-dated instruments at attractive yields," sources said.

For the six-year paper, out of the notified amount of Rs 2,000 crore, Rs 611.95 crore and Rs 229 crore devolved on the RBI and PDs, respectively; whereas for the 10-year paper, out of the notified amount of Rs 2,000 crore, Rs 358.357 crore devolved on the RBI and Rs 335 crore on PDs.

The central bank is signalling a higher interest rate in the medium and long term by fixing a high yield, dealers said.

"Although the yields of both the papers are higher than the secondary market yields, there is no appetite for medium- and long-term papers even at such high rates," sources said.

For its six-year paper, the central bank received 84 bids worth Rs 1,706.10 crore, out of which it received 49 bids worth Rs 1,159.05 crore. For its10-year paper, the central bank received 75 bids for Rs 1,741.643 crore out of which it accepted 59 bids worth Rs 1,306.643 crore.

The RBI had announced the Rs 4,000 crore twin-bonds auction on September 1. Money market analysts have described the auction as the second phase of the sterilisation process to set off by the inflows of Resurgent India Bonds proceeds. The RBI mopped up Rs 5,100 crore through open market operations (OMO).