"In the morning, the market talk was of a cut-off yield of 11.50-11.55 per cent at the auction," a dealer at a state-run bank said. "Now some bankers are looking at 11.48-11.50 per cent."

The Reserve Bank of India (RBI) auctions three-year government bonds worth Rs 1,500 crore on Monday.

Dealers said the bond auction was unlikely to drain much liquidity from the system as the issue size was small and was likely to receive good response.

"It appears that the RBI does not want to tighten liquidity much," a dealer at a private bank said. "Otherwise the auction size would have been larger and the private placement smaller."

The government on Thursday announced a private placement deal with the RBI of 10-year bonds worth Rs 2,000 crore.

Dealers said trade was brisk, with market interest mainlyfocused on securities with maturities up to 2001.

"There was a slight setback to prices in the morning but by afternoon, they were up again by 2-3 paise," a dealer said.

Demand for overnight money was moderate as it was the two-weekly reporting day for banks, dealers said.

Three-day money traded around 8 per cent, the central bank's repo rate, they said.

RBI sold Rs 689.5 crore securities in September 1998.

It made no purchases during the month.

The data was published in the RBI's monthly bulletin for December 1998.

The RBI said its net foreign currency purchases in October 1998 were $95.00 million.

The RBI said it bought $1.060 billion and sold $965 million during the month.

The RBI said its outstanding net forward sales at the end of October 1998 were $1.155 billion.