The centre privately placed a Rs 3,000-crore 11-year paper maturing in 2010 at 12.29 per cent. The Rs 2000-crore 12-year paper maturing in 2011 carried a 12.32 per cent coupon. The yield fixed for the 12-year paper is marginally higher than the similar maturity paper issued last year offering a coupon of 12.25 per cent.

The central government on January 18 had privately placed Rs 3000 crore with the Reserve BankI to neutralise the cash crunch in the wake of maturing of an equal amount of securities.

The government reissued two on-tap securities. The on-tap issue of August 20, 1998, was issued at 12.40 per cent paper maturing in 2013 and another on tap paper issued on November 30, 1998, at 12.6 per cent maturing in 2018.The coupon on both the re-issued papers were retained.

The pumping of another Rs 5,000 crore into the system in a span of two weeks is expected to put a pressure on the money supply which is currently ruling around 20 per cent.

According to money-market sources, the last two private placements held this month amounting to Rs 8,000 crore are long-term papers as the central government is not in a position to pay back borrowed funds in the next five to six years owing to the burgeoning fiscal deficit.

"The central bank does not want the yield curve to be distorted," said a bank official.

Money-market dealers are of the view that private placement of long-term papers will not have an impact on the yields as currently papers above three years are not traded in the market. "Over the last fortnight, we have not seen any trades in long-term gilts," said a money-market dealer.

After the announcement of the private placement issue, sentiments in the gilts market improved as the prices of short-term gilts wentup by 1-3 paise.

The money market is of the view that the private placement will not have an impact on the liquidity condition in the system. "The central bank is expected to suck out Rs 5000 crore from the system through its open-market operations next year as currently there are no takers for such long-term papers," one dealer pointed out.