In the first, the Fed would sell shorter dated securities.

The central bank had sold 150 billion rupees of dated securities on Friday, the settlement for which took place earlier in the day.

However, banks favoured short dated securities, in view of the high liquid T-bills.

But it is these longer dated securities, of 20 or 30 years, where Hendry sees the most potential over the next couple of years.

LIC, traders said, was active in switches, (swapping short-term securities for long dated securities).

The government will sell 70 billion rupees of treasury bills on Wednesday and 100 billion rupees of dated securities on Friday.

Ultimately, I think we'll find that demand for our longer dated securities will continue to improve and we'll be able to issue again in the longer part of the curve.'

The operative limit for special WMA for a state is subject to its holdings of central government dated securities up to a maximum of limit sanctioned.

The RBI may continue to issue more of 91-day treasury bills to bridge the fiscal gap but additional issuance of dated securities is not clear at this moment.'

The curve has flattened massively once again and hats off to anyone who defied market efforts to discount today’s action by selling short and buying longer dated securities before the Fed does.

Richard Kemmish, head of covered bond origination at Credit Suisse, said: “Banks are starting to term out their debt by buying longer dated securities because they are so attractive.

The dated securities issued by IKB International SA (IKB Lux) are characterised by relatively high initial write-downs and their remaining short maturities.

The Reserve Bank of India said on Tuesday that it will sell 100 billion rupees worth dated securities on Friday, following a buyback of 30 billion rupees of market stabilisation scheme bonds on Thursday.