For the six-year paper the cut-of-yield was pegged at 11.98 per cent and for the ten-year paper, the cut-of-yield was fixed at 12.25 per cent. The market was expecting a cut-of-rate of 11.85-95 per cent for the six year paper and 12.15-18 per cent for the ten year paper.

With this, the centre is left with another Rs 19,635 crore from the market to meet the gross annual borrowing programme of Rs 79,000 crore in fiscal 1999.

According to money market sources, market did not show active interest in both the medium and long term papers which is clear from the fact that the central bank mopped up Rs 5065crore through its three-day fixed rate repo.

"This shows that in spite of comfortable liquidity in the system, the market is not willing to subscribe to medium and long term instrument at higher rate. Players are currently preferring to lock funds in three-day repo at 8 per cent," money market sources said.

For the six-year paper, out of the notified amount of Rs 2000 crore, Rs 611.95 crore and Rs 229 crore devolved on RBI and primary dealers whereas for the ten-year paper, out of the notified amount of Rs 2000 crore, Rs 358.357 crore devolved on RBI and Rs 335 crore devolved on primary dealers.

According to money market dealers, by fixing a high yield, the central bank is signalling a higher interest rate at medium and long term. "Although the yields of both the papers are quite higher than the secondary market yields, there no appetite for medium and long term papers even at such high rates," said money market sources.

For its six-year paper, the central bank received 84 bids worth Rs 1,706.10crores out of which it received 49 bids worth Rs 1159.05 crores. For its 10-year paper, the central bank received 75 bids for Rs 1741.643 crore out of which it accepted 59 bids worth Rs 1306.643 crore.

The RBI on September 1 announced the auction of Rs 4000 crore double bond auction. With this, the central bank is left with borrowing another Rs 19,635 from the market to meet the gross annual borrowing programme of Rs 79,000 crore in the fiscal 1999.

Money market analysts have described the double bond auction as the second phase of sterilisation process to set-off the inflows of resurgent India bond proceeds.

In the first phase-between August 21 and August 24--the RBI had mopped up Rs 4,650 crore through open market operations (OMO) after which it collected another Rs 500 crore through OMO.