Analysts warn that interest rates would be high unless the government takes steps to cut the budget deficit and bring fiscal discipline back. Dealers said cut-off rates - the highest rates at which bids are accepted by the government public debt office - touched 17.
70 percent, almost 90 basis points above the auction rate.
The government accepted 8.3 billion rupees in 3-month bills, 853 million rupees in 6-month bills at 16.
69 percent, up 25 basis points, and 2.8 billion rupees in one-year bills at 16.57 percent, up 27 basis points.
Over the next twelve months the auction rate yield curve is now inverted with volumes heavily geared towards the short end.
The central bank has virtually stopped printing money for the government and largely stayed off the market during 2007, allowing inflation to come down.
At this auction the Central Bank bought 2.
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7 billion rupees, but the bank did not say whether they were maturing bills already held in its portfolio.
Central Bank's treasury bill portfolio is now hovering around 32 billion rupees.
The monetary authority has set tight targets for money growth in 2007 and has so far met them, steadying inflation.
Earlier this month the bank said it would meet the June target for base money 'comfortably.
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