Since Friday the market had already partially discounted the rates cuts, they said. The Central Bank cut the 17.0 percent unrestricted 'penalty' reverse repo rate, which is now the island's de facto upper policy discount rate to 16.50 percent, following a 200 basis point cut in January.
The monetary authority also cut its 12.00 percent window, which has restricted access, to 11.75 percent, and the 10.50 percent repo window, which sets the lower limit on inter bank lending to 10.25 percent.
At Wednesday's Treasury bill auction, the 3-month yield fell 21 basis points to 15.78 percent, the 6-month rate by just 2 basis points to 16.94 percent and the 12-month rate also 2 basis points to 17.74 percent.
The government raised 5.2 billion rupees, out of a planned 6.
0 billion rupee sale, the debt office, which is a unit of the Central Bank said.
A 4-year bond maturing on 01.04.12 which fell by about 20 basis points to 18.
00 percent levels in anticipation of a rate cut, traded at 17.80 percent but was later quoted around 17.85/18.00 percent, dealers said.
A 2-year bond maturing on 01.08.10 also fell to around 17.50/75 levels and later recovered to be quoted around 17.
92/18.00 percent.
Dealers say market participants were expecting a higher rate cut of at least 100 basis points after the 200 basis point cut in January, which may have contributed to the recovery in yields later on Wednesday.