The central bank received 191 bids for Rs 5,994 crore at the auction for anotified amount of Rs 6,000 crore. The RBI accepted 170 bids for Rs 5,006crore. The auction devolved on the RBI for Rs 515 crore, with primarydealers lapping up Rs 480 crore.

The cut-off yield set by the central bank was higher than the expectationsof most dealers. The market had expected a cut off yield of around 10.47 percent.

"Liquidity is not the issue here. The market is pretty comfortable onfunds," a bond trader with a primary dealership said while a countrytreasurer with a private bank said: "The market not fully subscribing to theauction just shows the lack of interest. This does not signal that playersare uncertain about interest rates. The RBI had made the direction ofinterest rates for the current fiscal very clear the day it slashed keyinterest rates".

Earlier in the day, call rates ended steady at just under seven per centamid sustained demand for funds to cover outflows towards the bond auctionon Wednesday, dealers said. Call rates closed at 6.90-7.0 per cent comparedto the previous close of 6.90-7.05 per cent. "There was continuous demandfor funds throughout the dayto cover outflows towards the auction," aprimary dealer said.

Bonds traded weak ahead of the auction results of a 10-year paper amidexpectation the bonds may devolve on primary dealers and the Reserve Bank ofIndia (RBI). "Traders are fearing the issue will devolve at yields below themarket levels", a primary dealer said. The 12.29 per cent 2010 bond wasquoted at Rs 111.10/15 compared to Rs 111.27/35 on Tuesday evening.