The central government privately placed Rs 4,000 crore of 25-year paper with the Reserve Bank of India (RBI) on Tuesday evening.
The central bank bought the paper at Rs 112.15. The estimated yield to maturity at that price is 8.95 per cent.
Dealers said that the government might need some funds urgently and the RBI does not want to disturb the market liquidity by announcing an auction for that.
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The treasury head of a private sector bank said, "There are already two auctions of an aggregate amount of Rs 6,000 crore in the current week. Another auction of Rs 4,000 crore could be a burden on the liquidity and could affect the result of today's floating rate bond auction."
Another section of the dealers, also feel that the a paper of 25-year maturity may not get a good response after Rs 6,000 crore of auction.
"There could have been a minor devolvement as the notified amount was not too small," said a primary dealer.
He mentioned that all the auctions of very long-term papers (with maturities of 20 years or more) were of lower amounts.
Dealers, however, feel that a portion of the paper will be sold through the open market window in the next week.
A dealer with a nationalised bank said: "The central bank might not sell the whole amount. But we expect a part of it to be kept in the open market window in the next week." Hen said that the insurance companies are expected to be the main buyers of the paper.