The Reserve Bank of India is draining cash from the banking system at a pace not seen in more than a decade. Bond dealers say the yield curve is flattening as a result.

The RBI has completed net open-market bond sales of 1 trillion rupees this financial year. That is its largest annual bond sale in over a decade, according to Reuters. Dealers expect the total to double by December.

The drain targets a historic cash surplus of about 11 trillion rupees, or 115 billion dollars. The surplus came from a special window that let banks raise foreign currency, which boosted forex reserves but flooded the system with rupees.

The 5-year to 10-year yield spread has compressed sharply. It stood above 45 basis points earlier and has narrowed toward the low 30s, reports Flash Finance. Short-term yields have risen faster than the 10-year benchmark, which still draws demand from insurers and pension funds.

Alok Sharma of ICBC expects another 1 trillion rupees of bond sales, or a hike in the cash reserve ratio. The RBI meets for its policy decision on October 7.