Out of the targetted gross borrowing for the current financial year Rs 29,267 crore has been privately placed with the central bank. Total sales through open market operations (OMO) so far has been to the tune of over Rs 26,936 crore. According to money market experts, the cut-off yield of 12 per cent 2008 paper is in line with market sentiments. The central bank received 367 bids worth Rs 9082.50 crore out of which it accepted 56 bids for Rs 3000 crore.

"The market sharply reacted to the cut-off price pegged on the eight-year paper as the prices of long-term papers immediately rose by 25-30 paise." The 12 per cent 2008 paper was quoted at a premium of Rs 106.95 in the secondary market immediately after the cut-off was announced. "There were bids between Rs 109.90/95 for the reissued paper," dealers said. The nine-year paper maturing in 2009 offering a coupon of 11.99 per cent was quoted at Rs 106.85 towards the day's close as against the morning levels of Rs 106.45.

The 11.50 per cent 2008 paper was quoted at Rs 104.25 as against the morning levels of Rs 104.05. "The prices of long term papers across-the-board are expected to firm up by another 10-25 paise on Friday," dealers said. In February, over Rs 5000-crore will flow into the system through interest payments on securities and treasury bills redemptions. As call rates crossed the benchmark 8 per cent level towards the day's close, primary dealers resorted to central bank refinance at 8 per cent.

"The inflows will comfortably see through the state loan auction slated for January 24. A section of market experts are of the view that the Government's decision to mopup over Rs 3,600 crore during the fortnight could not have been better timed as there is ample liquidity in the system.