The yield on India’s 10-year G-Sec dropped to 6.54% on Monday from a two-month high of 6.59% in the previous session after the Reserve Bank of India cancelled a 7-year bond auction. The central bank rejected bids worth 110 billion rupees for the 6.28% 2032 bond on Friday, signaling its discomfort with higher yields. Meanwhile, the downward momentum was capped by a weaker rupee, tight liquidity, and subdued demand. The rupee hovered near its record low, prompting RBI intervention to defend the currency, which in turn drained liquidity from the banking system. The tighter liquidity limited banks’ bond purchases, adding upside on yields. On the policy front, most market participants had been expecting an RBI rate cut in December, with the market still pricing in about 20?bps of easing over the next few months amid a benign inflation outlook. Separately, foreign inflows into Indian government bonds remain strong, totaling $1 billion in October.