The 3-month yield rose 6-basis points to 9.22 percent and the 12-month yield rose 6-basis points to 11.
26 percent.
The debt office which is a unit of the Central Bank said out of 15 billion rupees of maturing bills offered at the auction only 6.
4 billion rupees was accepted from the market.
It is not clear whether the Central Bank took up the balance with printed money.
On Tuesday excess liquidity in the interbank market dropped from 43 to 17 billion rupees, which market participants believe is due to forex swap with the Central Bank being unwound.
Allowing liquidity to fall in line with the unwound swap would not weaken the currency.
But if a forex swap is unwound when liquidity is low, the Central Bank will usually print money to offset any liquidity shortage that occurs as a result, it is unwilling to allow interest rates to move up.
The effect is the broadly similar to sterilized foreign exchange sales triggering exchange rate pressure and balance of payments crises.
But higher interest rates, which can slow credit can reduce negative pressure that can come from a swap that is unwound when liquidity is low.