Security prices are thus expected to rise further when the market opens on Wednesday. On Monday, the short- and the medium-term securities had reacted by 30-60 paise to the RBI's measures but the long-term bonds were yet to react.

The central bank has thus indicated that the yield on the ten-year paper is expected to fall from the current secondary market levels of 12.22 per cent to less than 12 per cent. The move will also allow corporates to go for long-term resources at much lower costs.

Analysts see the move by the RBI as a measure to boost banks' bottomlines through lower year-end yield-to-maturity (YTM) valuations of Government securities. The ten-year YTM for 1998 wasfixed at 12.15 per cent. The yield on the ten-year paper has risen to 12.25 per cent in the current financial year.

"I guess they wanted to send the signal for the long-term securities and then go for the short term ones," an analyst with a leading primary dealer said.

In a price list released late on March 1, the RBI put out two Government of of India securities on its sale list which had been privately placed with the central bank in February. The RBI put the 12.29 per cent gilt maturing in 2010 at 100.78 and the 12.40 per cent gilt maturing in 2013 at Rs 100.60, indicating yields of 12.15 per cent and 12.20 per cent respectively. The ten-year paper is trading at the 12.22 per cent levels in the secondary market.

"The list shows that the RBI does not want to disturb the one-to-ten-year yield curve immediately. It wants the market to take a position before it sets a benchmark for the medium- and the short-term securities," ICICI-Securities debt analyst Sandip Deb said.

Indications from the RBI arethat it might go for more aggressive open-market operations once the CRR cut takes effect on March 13. "You can expect some attractive securities at that point of time," a debt dealer with a primary dealer said.

"Call rates are expected to remain between 6 and 8 per cent over the next fortnight," JP Morgan's Ashish Pitale said. He, however, expects the rupee to weaken. "The interest rates announced would lead to a decline in forward premiums, but over a period of time could translate into a weaker rupee," a JP Morgan report on Indian Markets Outlook said.

"The RBI might let the currency slide over the next month or so to 43.50/44.00, and it would be more comfortable with a marginally undervalued rupee than a 5 per cent overvalued one," JP Morgan said in its commentary.