Bonds slump on RBI's SLR cut buzz

The 10-year government bonds declined the most in almost three weeks on speculation that policy-makers will cut the amount of debt banks are required to hold to free up cash.

Benchmark yields climbed from near a five-month low as a reduction in the Statutory Liquidity Ratio (SLR) will damp demand for the securities. The country’s banking rules require lenders to invest 25 per cent of their deposits in debt. A 1 percentage-point cut may potentially free up Rs 35,000 crore, said S Srikumar, the chief debt trader at state-owned Corporation Bank.