By Anoop Agrawal Oct. 29 (Bloomberg) -- Indian bonds gained for a second day, pushing down 10-year yields to the lowest since February, on speculation the central bank will take more steps to inject funds into the financial system. Bonds reversed earlier losses on speculation the central bank will add to this month's rate cut and cash reserve reduction to bolster funds in the system, according to Mahesh Pai, a trader at state-owned Canara Bank. Finance Minister Palaniappan Chidambaram met officials of market regulators and the Reserve Bank of India in New Delhi to discuss financial market conditions in the country. ``The authorities may take further steps to boost liquidity,'' Mumbai-based Pai said. ``Investors are pricing that factor, which is why yields may decline further.'' The yield on the benchmark 8.24 percent note maturing in April 2018 fell 8 basis points, or 0.08 percentage point, to 7.51 percent, from Oct. 27, as of 12:40 p.m. in Mumbai, according to the central bank's trading system. The price rose 0.56, or 56 paise per 100 rupee face amount, to 103.38. Markets were closed yesterday for a holiday. The 10-year yield may drop to 7.45 percent in coming days, Canara Bank's Pai said. The Reserve Bank on Oct. 20 unexpectedly cut its benchmark overnight lending, or the repurchase rate, by 1 percentage point to 8 percent for the first time since 2004. It also freed as much as 1 trillion rupees ($20.7 billion) for lenders since Oct. 11 by reducing the amount they must set aside in cash to cover deposits. It cut the so-called cash reserve ratio by 2.5 percentage points to 6.5 percent. To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.

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