The central bank has priced the bond at Rs 100.4. The RBI put the 12.40 per cent 2013 bond for sale for five days from Wednesday at its open market operations window. The same bond was placed with the RBI for a total of Rs 3000 crore by the centre.

Meanwhile, the 10-year, 12.99 per cent paper--auctioned on Tuesday--was traded at Rs 100.22 on Wednesday against the previous day's level of Rs 100.10.

The bond prices across the board firmed up during the day owing to high demand for bonds in the market coupled with easy liquidity in the system.The 12.25 per cent nine-year paper maturing in 2008 was traded at Rs 102.05 as against the previous level of Rs 101.94, 11.50 per cent 2004 paper at Rs 100.28, 11.98 per cent 2004 paperat Rs 102.08 (Rs 101.94) 12.29 per cent.At the shorter end, the 11.50 per cent 2002 was traded at 100.06, 11.55 per cent 2001 paper at Rs 100.14, 11.40 per cent 2000 paper at Rs 100.98 (Rs 100.89).

The overnight call rate also ruled easy between 6-6.50 per cent during the day. There liquidity in the system was easy as the central bank mopped up Rs 6,535 crore through its three-day fixed rate repo. According to money market sources, inflows to the tune of Rs 7,000 crore came into the system during the day owing to interest on cash reserve ratio balances (Rs 1,500 crore), redemption of the 12 per cent 1999 stock and interest payment on a few securities. "The fact that the central bank received around 188 bids worth Rs 7,184.36 crore for the new loan auctioned yesterday shows that liquidity in the system is quite easy," said a money market dealer at STCI. According to dealers, term-lending institutions were flush with funds resulting in excess liquidity in the system, dealers said.

"One large term-lendereither had a huge repayment or raised money through a fresh placement and the funds are being deployed in the call money market," said a primary dealer. The liquidity overhang would be temporary and funds would soon be diverted, dealers said.

Primary dealers had been given 100 per cent refinance on their overnight bond positions to enable them to underwrite Tuesday's 10-year bond auction, they said. There is lot of demand for long term papers as the market expects a flood of long-term issues during the year, dealers said.

Marginally higher demand was seen for short-term bonds as the current trend indications that most issues during the year would have longer maturities, they said.

"There is ample liquidity in the system but we have to see how much money flows out into the open market operations sale," said a dealer from a private bank.