By V. Ramakrishnan April 19 (Bloomberg) -- India’s 10-year bonds advanced on speculation the highest yields in 17 months attracted investors. Yields declined before a Reserve Bank of India policy meeting tomorrow as investors may have already priced in projected interest-rate increases needed to tame inflation, said Srinivasa Raghavan, head of fixed-income trading at IDBI Gilts in Mumbai. The central bank will increase its benchmark lending and borrowing rates at a review tomorrow by at least 25 basis points, according to all 25 economists in a Bloomberg Survey. “Bonds are rising because these are good levels to buy,” said Raghavan. “The tone of the policy meeting will provide the direction in the coming days.” The yield on the 6.35 percent note due January 2020 dropped two basis points, or 0.02 percentage point, to 8.06 percent as of 9:40 a.m. in Mumbai, according to the central bank’s trading system. The price rose 0.13, or 13 paise per 100 rupee face amount, to 89.63. It reached 8.13 percent on April 15, the highest level since Oct. 3, 2008. The Reserve Bank of India will also tomorrow raise the cash reserve ratio, the proportion of deposits lenders must hold as reserves, by at least 25 basis points from 5.75 percent, according to all but three of the economists in the Bloomberg survey. The nation’s benchmark wholesale-price index climbed 9.9 percent last month, the most since October 2008, after February’s 9.89 percent gain, the commerce ministry said April 15. The central bank raised interest rates last month for the first time since July 2008, increasing the reverse-repurchase rate to 3.5 percent from a record-low 3.25 percent. It also increased the repurchase rate, at which the central bank lends to commercial banks, to 5 percent. The cost of five-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, fell. The rate, a fixed payment made to receive floating rates, was 6.99 percent, compared with 7.02 percent on April 16.

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