It has simultaneously reduced the notified amount for 364-day treasury bills by Rs 200 crore to ensure subscription to the Rs 3,000 crore two-year paper to be auctioned on September 28, 1998. Incidentally, the RBI has slashed the notified amount of the 364-day treasury bills for the first time in the current financial year.

At a price list issued on Monday, the RBI put on sale the 91-day treasury bills maturing on December 19, 1998, at 8.96 per cent and the 364-day treasury bills maturing on August 27, 1999, at 9.52 per cent. The new list is effective from September 22, 1998, and deals will be for a minimum amount of Rs 1 lakh and multiples of Rs 1 lakh thereafter, an RBI release said.

The RBI had pegged the cut-off yield of the 91-day treasury bills at 9.01 per cent while that of the 364-day treasury bills at9.60 per cent. "The current yields are not in line with the secondary market," a debt dealer in a local brokerage said. According to dealers, the RBI might hike the yields on both these papers after the two-year paper auction.

The RBI has announced that it will auction the Rs 3,000 crore two-year paper on September 28, 1998, to mop up excess liquidity on account of the resurgent bonds.

The move by the RBI to slash the 364-day treasury bills' notified amount by Rs 200 crore is an indication that the central bank wants to ensure the success of the two-year paper.

The 364-day treasury bills will be auctioned on Wednesday. The RBI has hiked the notified amount of the 364-day treasury bills on August 12, 1998, from Rs 200 crore. Earlier on July 1, 1998, the RBI has hiked the notified amount of the treasury bills from Rs 100 crore to Rs 200 crore.

According to money market dealers, liquidity is easy as about Rs 8,000 crore is locked in repos and the two-year paper will sail through. The central bank moppedup Rs 5,824 crore through three-day repos. "Foreign banks will put in money as they have a liking for short-term papers," a dealer said.