India’s 10-year bonds dropped for a fourth day on speculation a shortage of cash in the banking system will deter buyers. Yields climbed to the highest level in more than a month as Reserve Bank of India Deputy Governor Subir Gokarn signaled yesterday the central bank will refrain from cutting the cash- reserve ratio. Gross domestic product rose 8.9 percent in the three months through September from a year earlier, beating the median estimate of 8.2 percent in a Bloomberg survey, according to data from the Central Statistical Organisation on Nov. 30. “Liquidity continues to be tight and there’s some fear that it may worsen,” said Namrata Padhye, a Mumbai-based fixed- income strategist at IDBI Gilts Ltd., a primary dealer that underwrites government debt. “Economic growth is also buoyant.” The yield on the 7.80 percent note due May 2020 rose one basis point to 8.12 percent as of 9:54 a.m. in Mumbai, according to the central bank’s trading system. It earlier touched 8.13 percent, the highest level since Oct. 28. The price fell 0.04, or 4 paise per 100 rupee face amount, to 97.92. Banks borrowed an average 1 trillion rupees ($22 billion) a day from the central bank’s repurchase auction window in November, compared with 522 billion rupees a day in October, according to data compiled by Bloomberg. “The cash-reserve ratio clearly remains an option but we believe that our monetary stance is still anti-inflationary, we are still dealing with inflation,” Gokarn told reporters yesterday. “We don’t want to send any mixed signals about a change in the monetary stance.” The proportion of cash banks must set aside as reserves is currently 6 percent. To contact the reporter on this story: V Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net To contact the editor responsible for this story: James Regan at o jregan19@bloomberg.net.

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