The yield on long-term paper has been falling continuously during the course of the last financial year. During 1995-96, the yields on the 10-year paper at the auction fell from 13.85 per cent to 13.65 per cent.
Correspondingly, the cut-off coupon rate prescribed by the RBI for valuation of yields also came down from 14 per cent in 1995-96 to 13.56 per cent.
Money market dealers expect the security to trade at an indicative yield of 12.90 per cent. They also expect the RBI to come out with an issue of 10-year state government paper at a fixed coupon of 13.05 per cent.
Meanwhile, in the repos auction held yesterday, the RBI reduced the cut-off rate to 2.90 per cent. The weighted average repos rate was 2.84 per cent. The RBI received 59 bids aggregating Rs 9,280 crore, of which it accepted 9 bids, amounting to Rs 4,130 crore. With over Rs 5,000 crore still floating in the banking system, calls are expected to continue to rule low.