The Indian government bonds slumped Monday as investors moved away from safe-haven buying after the Reserve Bank of India increased its cash reserve ratio (CRR) absorb excess liquidity from the banking.

The yield on the benchmark 10-year bonds, which moves inversely to its price, rose nearly 9 basis points to 6.32 percent, the yield on long-term 30-year note bounced 1 basis point to 6.69 percent and the yield on short-term 2-year note jumped more than 10 basis points to 6.07 percent by 07:00 GMT.

The Reserve Bank of India (RBI) has stepped up efforts to control the excess liquidity that has emerged out of the whole process of demonetization, announced by Prime Minister Narendra Modi, effective from November 8, 2016.

On Saturday, the RBI unexpectedly ordered commercial banks to deposit their extra cash with it. The CRR remains unchanged at 4.00 percent of outstanding net demand and time liabilities (NDTL) but scheduled banks shall maintain an incremental CRR of 100 percent on the increase in NDTL between September 16 and November 11, Scotiabank reported.

Further, the increased CRR is expected to pause domestic bond-buying, raising government bond yields that have tumbled post the surprise abolition of INR500 and INR1,000 notes, although foreign investors reduced their positions by total USD2.42 billion in the meantime.

The RBI next bi-monthly two-day monetary policy meeting is scheduled to be held on December 6-7. It is widely expected that the current trend of lower inflation expectations will space for the Governor Urjit Patel for further monetary easing.

Meanwhile, the Sensex rose 0.26 percent or 67.23 points to 26,383.5 and Nifty-50 futures traded 0.41 percent higher or 33.40 points at 8,151.5 by 07:10 GMT.