By V. Ramakrishnan Jan. 25 (Bloomberg) -- India’s 10-year bonds fell the most in almost a week on speculation the central bank will act to curb money supply at its policy meeting on Jan. 29 to slow inflation. Yields rose as the Reserve Bank of India will probably ask banks to set aside a greater proportion of their deposits as reserves, a Bloomberg survey showed. The central bank will raise the cash reserve ratio by 50 basis points to 5.5 percent, a median of estimates by 16 economists showed. “Investors are paring their positions because bond prices have rallied a quite a bit over the past week,” said S. Srikumar, chief of fixed-income at state-owned Corporation Bank. “There will be an element of caution in the run up to the policy meeting.” The yield on the 6.35 percent note due January 2020 rose two basis points to 7.57 percent as of 10:32 a.m. in Mumbai, according to the central bank’s trading system. The price fell 0.13, or 13 paise per 100 rupee face amount, to 91.58. The repo rate, at which the RBI lends to banks, and the reverse repo rate will be held at record lows of 4.75% and 3.25% respectively, the survey of economist showed. The wholesale-price inflation may accelerate to 9 percent by the end of March, from 7.31 percent last month, Pronab Sen, secretary at the department of statistics said on Jan. 21. The cost of five-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, increased. The rate, a fixed payment made to receive floating rates, rose two basis points to 6.87 percent. To contact the reporter on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net.

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