"Call rates have not risen despite an outflow of Rs 50 billion for the twin auction and besides there has been no credit pick up in the second half of the year, contrary to earlier expectations," said a primary dealer. Dealers said in the backdrop of abundant liquidity there was deployment pressure which was reflected in the ongoing chase of securities. The RBI has announced several cash infusing measures from December 1 to keep liquidity comfortable. It will treat cash in banks' vaults as eligible cash reserve ratio (CRR) balances from December. Dealers said this is likely to lower demand for cash by Rs 45 billion.

It also introduced a special liquidity support to banks during the millennium transition period against their excess holdings of treasury bills and government securities at 2.5 per cent over the bank rate. The 12.40 per cent 2013 bond was dealt at Rs 104.98 compared to Thursday evening's Rs 104.88/92. The 12.32 per cent 2011 stock was dealt at Rs 104.76 against the previous Rs 104.66/68.

"It is likely there would be bond auction or a sale list announcement, which would mop up the excess liquidity later," a dealer at a brokerage said."Though at the moment there appear to be no gilts in the RBI's inventory, it is possible the government will announce a private placement," he said. Dealers said the possibility of an open market operation (OMO) was remote since the cut-off prices at recent auctions had been higher than market rates.

"A bond auction appears to be the likely mopping up route,"an analyst at a brokerage said.