Nov. 9 (Bloomberg) -- India’s 10-year bonds rose for the first time in four days after Prime Minister Manmohan Singh signaled fiscal stimulus measures may be withdrawn next year, bolstering investor confidence in the nation’s assets.

The yield on the benchmark note maturing in 2019 fell from the highest level in more than a week after Singh said yesterday that faster economic growth will allow the steps to be wound down. The prime minister said the economy may expand 6.5 percent in the year ending March 31 and 7 percent the following year.

“The sooner the withdrawal, the quicker it will stabilize markets and reflect more realistic levels,” said S. Rajendran, general manager of treasury at state-owned Union Bank of India in Mumbai. “I am expecting yields to drop in the near-term.”

The yield on the 6.9 percent note due July 2019 dropped 1 basis point, or 0.01 percentage point, to 7.3 percent at the 5:30 p.m. close in Mumbai, according to the central bank’s trading system. The price rose 0.05, or 5 paise per 100 rupee face amount, to 97.22.

India reduced borrowing costs to record lows to prevent growth from slowing amid the global recession. The Reserve Bank of India on Oct. 27 ordered lenders to keep more cash in government bonds, raising the statutory liquidity ratio to 25 percent from 24 percent. Governor Duvvuri Subbarao said it was appropriate for the central bank to exit monetary stimulus in a “calibrated way.”

“There are clear signs of an upturn in the economy,” Singh told the India Economic Summit organized by the World Economic Forum in New Delhi yesterday. “Like other countries we resorted to a significant stimulus and we will take appropriate action next year to wind this down.”

In the derivatives market, 10-year bond futures maturing in December were traded at 7.99 percent, according to the Web site of the National Stock Exchange of India Ltd. Contracts due March were at 8.28 percent.

The cost of five-year interest-rate swaps, or derivative contracts used to guard against fluctuations in borrowing costs, was little changed. The rate, a fixed payment made to receive floating rates, was at 6.65 percent, compared with 6.64 percent at the end of last week.

To contact the reporter on this story: Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net

Last Updated: November 9, 2009 07:16 EST