By Anil Varma Oct. 16 (Bloomberg) -- India's 10-year bonds headed for the biggest gain in a month, pushing yields to the lowest since March, after the central bank announced measures to boost funds in the nation's cash-strapped financial system. Yields declined for a second day after the Reserve Bank of India cut the amount of deposits lenders need to set aside as reserves for the second time in a week and eased restrictions on its lending to banks. Bonds also rallied after a government report showed inflation slowed to the least since May. ``The reserve-ratio cut and other measures to boost liquidity have boosted the bond market today,'' said Chidambaram Lakshmanan, a fixed-income trader at IndusInd Bank Ltd. in Mumbai. ``We can't rule out more measures to ease monetary conditions.'' The yield on the benchmark 8.24 percent note due April 2018 slid 19 basis points to 7.71 percent as of 12:03 p.m. in Mumbai, according to the central bank's trading system. The price rose 1.3 per 100 rupee face amount to 103.5. A basis point is 0.01 percentage point. The Reserve Bank of India yesterday cut the cash reserve ratio to 6.5 percent from 7.5 percent to ease the worst cash crisis in the economy since 2000. India has injected one trillion rupees ($20.5 billion) through reserve-ratio cuts since Oct. 11 as money market rates surged and mutual funds sought government help to meet the highest redemptions by investors this year. The central bank's moves to inject cash helped lower the overnight borrowing rate in the money market to 6.8 percent today from an 18-month high of 16 percent on Oct. 10. To contact the reporter on this story: Anil Varma in Mumbai at avarma3@bloomberg.net.

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