India will continue bond sales to sap liquidity

Pledges defense of rupee in a calibrated manner.

The Reserve Bank of India will consider bond sales to further drain cash and will only ease steps to defend the rupee when volatility in exchange rates have subsided.

Governor Duvvuri Subbarao said RBI has refrained from describing its cash-tightening measures as "temporary" to avoid spooking markets as to the timing of its moves.

Subbarao might consider bond sales via open market operations (OMO) as part of its cash-tightening measures, sending 10-year bond yields up 5 basis points to 8.31% from levels before the comments.