The media report did not identify the banking sources.
The 10-year benchmark bond yield closed at 7.1566%, its lowest since May 2. The yield had ended at 7.2416% on Wednesday and snapped a nine-day losing streak.
"The news is highly speculative, but since some big players reacted, we saw a sharp downward move in yields. But the 7.15% level should hold till the actual decision is out along with the commentary from the RBI," a trader with a primary dealership said.
The RBI's monetary policy decision is due on Friday and market participants remain divided over the quantum of rate hike, with views widely split between 25 basis points and 50 basis points, according to a Reuters poll of economists.
The central bank has raised the repo rate by 90 basis points to 4.90% since embarking on a tightening cycle at an unscheduled policy meeting in May, to curb inflationary pressures.
"We expect a front-loaded 50 bps hike in the August policy keeping in view the external sector pressures as global key central banks continue the fight against inflation and as India's inflation hovers around 7% till September," said Upasna Bhardwaj, a senior economist at Kotak Mahindra Bank.
Even as inflation is expected to ease in coming months, traders do not anticipate the same to move towards the RBI's comfort zone anytime soon, which may see more hikes in coming months.
"Friday's move would also provide a greater clarity on the terminal policy rate, and hence the move will be crucial from a medium-term perspective," a trader with a private bank said.
(Reporting by Dharamraj Lalit Dhutia; editing by Uttaresh.V)
By Dharamraj Lalit Dhutia
