25-yr paper cut-off set at 6.26 per cent

 According to market sources, the yield is about 25 basis points higher than market expectations. They feel that the entire yield curve will realign to the new cut-off yield and prices will fall by at least Rs two in the long end.

 Following the announcement, the yield on ten-year paper which was ruling at 5.17 per cent throughout the day, closed higher at 5.21 per cent.

 Prices of long term papers also fell by 50-60 paise whereas in the medium term, dealers reported prices falling by 20-25 paise after the auction results. The RBI today did not take any devolvement but lowered the cut-off price and the entire issue sailed through.

 Dealers said the signal points towards increase in interest rates, as the RBI chose not to take a devolvement upon itself. Instead it preferred to accept the bids for the total notified amount of Rs 5,000 crore.