The Reserve Bank of India will begin the government's borrowing programme for 2003-04 on April 8 by raising Rs 9,000 crore (Rs 90 billion).

The central bank will conduct a price-based auction of the 7.37 per cent 2014 paper for Rs 5,000 crore (Rs 50 billion) and a yield-based auction of the 2023 gilt for Rs 4,000 crore (Rs 40 billion). The market expects Rs 111-111.50 for the 11-year paper and a yield of 6.5 per cent on the 20-year paper.

The 10-year benchmark gilt closed today at 5.99 per cent. The long-dated 8.35 per cent 2022 paper closed unchanged at 6.393 per cent. Yields on government securities finished the day almost at Wednesday's level, while corporate bond yields fell by 15 basis points. Despite abundant liquidity, the market was cautious because of the Rs 9,000 crore (Rs 90 billion) twin auctions.

The easy liquidity in the market was underscored by the fact that the RBI received 34 bids aggregating Rs 27,880 crore (Rs 278.80 billion) at the three-day repo auction. It accepted all of them.

The commercial paper market got a fillip with corporates raising short-term money at cheap rates. Indian Petrochemicals Corporation raised Rs 150 crore (Rs 1.5 billion) by placing a 90-day commercial paper at 5.9 per cent with a private bank. The issue has been rated P1+ by rating agency Crisil.

Engineering and cement major Larsen & Toubro raised Rs 10 crore (Rs 100 million) by placing a 90-day commercial paper at 5.68 per cent with a foreign mutual fund. Larsen & Toubro had raised Rs 10 crore on Wednesday by placing a 90-day paper at 5.78 per cent with a private bank.

Corporate bond yields fell sharply, narrowing the spread of government paper in the five-year segment to around 45 basis points from Wednesday's 50.

The five-year bond of Reliance Industries was traded at 6.45 per cent, compared to Wednesday's 6.62 per cent. The National Thermal Power Corporation's 2006 bond was dealt at 6.28 per cent, lower than the previous day's 6.38 per cent.

The government plans to raise Rs 71,000 crore (Rs 710 billion) in April-September 2003, against Rs 68,000 crore (Rs 680 billion) raised in the corresponding period in 2002. According to the Budget for 2003-04, the Centre's net and gross borrowings are pegged at Rs 1,07,194 crore (Rs 1.07 trillion) and Rs 1,66,000 crore (Rs 1.66 trillion), respectively.