The Government has so far privately placed Rs 20,000 crore with the Reserve Bank out of its total borrowing of Rs 49,000 crore so far. The budgeted borrowing programme of the current fiscal is Rs 83,000 crore.

On Thursday, the RBI auctioned the 12.32 percent 2011 bond at a yield of 11.97 per cent. The Rs 2,500 crore devolved on the 13 primary dealers on Thursday.

Immediately after the announcement, the prices of gilts fell. "The market may not be able to take the burden of another long dated stock. As it is, there is a glut of supply," a primary dealer said."It is a matter of time before the RBI puts the re-issued stock on its sale window," he said.

"Prices had begun to rally in afternoondeals just before the announcement came in," a dealer at a brokerage said.