Mint St conducts OMO with 3-year paper

 Against 111 bids received for Rs 2,773 crore, RBI accepted just 58 bids for Rs 1,896 crore as it set the cut-off price at Rs 100, giving an effective yield of 4.827 per cent.

 This is much higher than the market expectation of 4.75 per cent. The central bank had targeted to sell Rs 3,500 crore of this paper from its portfolio.

 The sale of the three-year bonds and resultant cut-off price has created uncertainty in the bonds market. Yields on government securities rose and closed at their highest level in three weeks on Thursday.

 The benchmark 10-year paper yield closed at 5.12 per cent, up from the previous close of 5.07 per cent. The 10-year paper last closed at this level on October 1. Call rates slightly hardened, closing at 4.4-4.6 per cent against 4.4-4.5 per cent.

 This follows a slew of measures by the central bank this week to absorb excess liquidity in the system and dampen market expectations of a rate cut.

 The central bank has been mopping up funds from the market daily through its one-day repo, which has in the past four days mopped up a little over Rs 8,000 crore.

 It has also gone in for 28-day repo, to which it has not received very good response. Yesterday, the central bank received no bids at all.