Dealers said that the hike was in line with market expectations. The uniform price auction was well received by market players. For a notified amount of Rs 200 crore at the 91-day T-bill auction, the central bank received 31 competitive bids worth Rs 775 crore and one non-competitive bid worth Rs 300 crore. At the auction of the 14-day T-bill, for a notified amount of Rs 100 crore the central bank received 8 competitive bids worth Rs 570 crore out of which it accepted 4 partial bids worth Rs 100 crore.

The central bank accepted three competitive bids including one partial allotment for Rs 200 crore and one non competitive bid worthRs 300 crore. There was no devolvement on either RBI or primary dealers. The cut-off price was fixed at Rs 97.68.

On Friday the central bank sold huge quantum of 91-day T-bills through its sale window. According to dealers, the market showed a voracious appetite for the T-bills on Friday which forced the central bank to put out T-bills twice through its sale window. "The quantum sold through the sale window is more than Rs 500 crore," money market sources said.

The RBI was selling 91-day T-bills maturing on November 16, 1998 and January 9, 1999 at 8.29 per cent and 9.08 per cent respectively. "Currently the appetite for T-bills has increased as market players are not interested in locking their surplus funds in short dated gilts maturing above two-years due to uncertain interest rate movements. Short-term T-bills is the only attractive option before them," money market sources said.

In the secondary market, T-bills yield across all maturities have softened by almost 10 basis points. According to moneymarket dealers, through its Rs 5,000 crore private placement issue, the central bank has not sucked the excess liquidity from the system.

"Thus cash surplus money market players have no other option but park their funds in short term instruments. Lending in call is also not very attractive as call rates hovering close to repo rate," sources said.

According to market sources, the uniform price auction has given a much needed depth to the treasury bills segment, increase the number of players, widen the T-bills market and bring about a lower cut-off yield. According to market sources, the Dutch auction system has encouraged aggressive bidders participation and brought down the cut-of-yield.