Rupee gains only modestly

Indian bond yields and swap rates surged after the Reserve Bank of India (RBI) moved to tighten rupee liquidity further in an attempt to shore up the weak local unit, which only edged up modestly despite the measures.

At 9:08 a.m., the partially convertible rupee was at 59.53/54 per dollar, after rising to as much as 59.40 earlier, but still stronger than its close of 59.76/77 on Tuesday.

The benchmark 10-year bond yield rose as much as 33 basis points to 8.50 percent, its highest since late May 2012.

The 1-year swap rate jumped 41 bps to 9.30 percent, while the benchmark five-year rate rose 27 basis points to 8.45 percent, according to Thomson Reuters data.

The overnight cash rate jumped to 10 percent versus Tuesday's close of 6.50/6.55 percent.

The Reserve Bank of India took new steps to support the rupee, signalling it will stay the course with its defence of the currency despite risks to economic growth.