This will be the third re-issue of 11.99 per cent 2009 paper in the current fiscal. Through the auction, the Centre has so far raised Rs 8,000 crore, of which one was privately placed for Rs 2,000 crore.

With the auction, the Centre will complete 61 per cent of its gross borrowing programme of Rs 83,571 crore for the current fiscal. Of the total gross borrowing in the current fiscal, the Centre has privately placed 33 per cent with the RBI, a substantial portion of which has been offloaded in the market through the central bank's open market operations (OMO).

Market sources say liquidity is comfortable in the system, as nearly Rs 2,200 crore is expected to flow into the system during the fortnight from interest payments and redemption of treasury bills. The call rate rules at 8 per cent.

Apart from the Rs 400-crore worth of inflow through the 364-day T-bills redemption on August 13, Rs 288 crore will flow into the system on August 5 through interest payments on the 10.75 per cent 2000, 12.75 per cent 2002, 11.25 per cent 2006, and the 11.50 per cent 2011.

JP Morgan research head Ashish Pitale said the auction will not devolve on the RBI, as provident funds and institutions are expected to lap it up. Ater the auction's announcement, the long-term gilts prices fell by 5-10 paise, only to recover towards close.

The 10-year paper is quoting at an yield of 11.62-11.65 per cent. The price is hovering between Rs 102.05 and Rs 102.10.

The central bank had on July 29 auctioned the 17-year paper maturing in 2016 for a notified amount of Rs 2,000 crore. The price of the paper was fixed at Rs 100.43. The auction sailed through smoothly, as the RBIreceived 181 bids worth Rs 6,834.5 crore, of which it accepted 28 bids for Rs 2,000 crore.