The market expects the coupon for the 10-year paper to be pegged between 11.97-12 per cent.

The market is expected to lap up the long-term paper as around Rs 6,000 crore is expected to come into the system on Wednesday on account of the redemption of 12-per cent 1999 paper (Rs 4,417.17 crore) and interest payment on 11.10 per cent 2003 paper and 12.30 per cent 2007 paper.

According to money market sources, the announcement of a 10-year paper is keeping in line with the Reserve Bank of India's objective of floating longer maturity paper in order to avoid clubbing of maturity of dated papers with similar maturity in the market.

The centre has raised its budgeted net borrowing programme by 19 per cent for fiscal 2000 pegging the net borrowing target at Rs 57,461 crore, up from Rs48,326 crore targetted last year. The gross borrowing programme is pegged at Rs 83,571 crore as against Rs 79,376 crore last year.

Last year, the centre's borrowing programme exceeded its target by more than Rs 13 crore to mop up Rs 93,752.82 crore. Of this, Rs 30,000 crore was privately placed by the central bank and Rs 8204.617 crore devolved on RBI. The RBI sold securities worth more than Rs 20,000 crore through its open market operations (OMO).

"Currently long-term paper is much in demand and banks, provident funds and institutions are expected to subscribe to long-term paper," said money market dealers.

The comfortable liquidity in the system coupled with easy call rates have also improved sentiments in the gilts market. On Monday, the bond prices across all maturities moved up by 10-15 paise and trading was mainly confined to medium and long-term instruments.

At present, 12.25 per cent 9-year paper maturing in 2008 is quoted at Rs 101.78 offering a yield of 11.93 per cent. "Activity is mainlyconfined to medium to long-term paper and only marginal trading is seen in short-term papers," a dealer at a private sector bank said.