State-run banks to lower bond purchases as liquidity tightens, say treasury officials

State-owned banks will slow government bond purchases in the weeks ahead as banking system liquidity tightens, said treasury officials from nine state lenders. Bond yields have spiked since October 6, when the central bank said it will keep monetary policy restrictive and sell bonds to manage banking system liquidity. Bond prices move inversely to yields.

India's benchmark 10-year bond yield rose to a seven-month high of 7.40% on Monday, rising from a two-month low of 7.07% hit on Sept. 22. It was at 7.31% at 2:10 p.m. IST on Friday.