Mumbai: Indian federal bond yields eased on Monday as softening commodity and oil prices raised expectations of a rate cut in the near term, but a sharp fall was prevented by auctions of $3.4 billion of debt this week.

Volumes were thin and cash rates climbed to more than one-week highs over 9% as banks borrowed heavily in the interbank money markets to secure their funding needs in a holiday-shortened week.

At 9:49am, the 10-year bond yield was at 7.76%, four basis points below Friday’s close of 7.80%. It hit an eight-month low of 7.49% on Wednesday.

“Traders are consolidating their positions after a sharp volatile week and prices are expected to trade in a narrow band,” said a senior dealer at a foreign bank.

Volume was a low Rs650 million ($13 million) on the central bank electronic trading platform, with the 10-year bond being the most heavily traded.

The central bank will auction Rs70 billion of bills on Wednesday and Rs100 billion of bonds on Friday.

The central bank kept its key lending rate steady at 8.0% as expected on Friday to give it time to gauge the impact of a hefty, surprise cut earlier.

Rajeev Malik, economist at Macquarie Securities, said the central bank would have to cut banks’ cash reserve requirements and policy rates aggressively in the near term to cushion the severity of an anticipated economic downturn.

“In the current global and local settings, the RBI should be putting more policy easing in place, because it has that flexibility and because the economy is screaming for it,” Malik said.