| Higher-than-expected cut-offs at state loan auctions dragged prices down further. Thorat said the higher ceiling under MSS will help in absorbing liquidity on an enduring basis. |
| "It means that even if there is some government spending after advance tax outflows, RBI will come out with MSS auction to drain the liquidity," said a senior treasury official at a private sector bank. After the RBI announced a low size of MSS in the second round, market was expecting the trend to continue, the official said. |
| The RBI will on Wednesday raise Rs 2,000 crore by selling 6.65 per cent, 2009 bond under the MSS. |
| "Sentiment is already jittery on concerns of liquidity tightening considerably after advance tax outflows. Thorat's comments only added to the fears," said another dealer. Around Rs 45,000-50,000 crore will flow out from the system as last instalment of advance tax later this week. |
| Also, after the unexpected rally on Monday, there was some profit-taking, dealers said. |
| On Monday, gilts rallied as foreign banks bought and hedged by receiving in overnight index swaps. |
| The Rs 2,300 crore state loan auction, however, had no major impact on sentiment today because the amount is not huge, dealers said. |
| The most-tracked 8.07 per cent, 2017 bond ended at Rs 100.68 (7.9664 per cent) against Rs 100.84 (7.9428 per cent) on Monday. |
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