By IndiaHub 
The benchmark 10-year yield will likely open 3-4 basis points (bps) lower, a trader at a foreign bank said, after closing at 6.3750% in the previous session.
FX and money markets were shut on Monday due to a local holiday.
“The overhang of the conflict is over, so traders with lighter books will start buying,” a trader at a primary dealership said.
India and Pakistan agreed on a full and immediate ceasefire over the weekend, which bolstered investor confidence in Indian markets.
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Prime Minister Narendra Modi’s first public address since the Indian armed forces launched strikes on Pakistani terrorist camps also calmed nerves. “The 10-year yield can test 6.32% during the day, but the direction of the yield will depend on whether PSU banks offload their stock,” the trader added. State-run banks bought bonds worth 90.6 billion rupees ($1.07 billion) last Friday.
The focus will now be on India’s April inflation data and state debt supply, both due later in the day. Economists polled by Reuters expect the key price gauge to have declined to a near six-year low of 3.27%.
If inflation is below market expectations, bonds could rally further, traders said.
Indian states are due to sell bonds worth 115 billion rupees.
RATES
India’s overnight index swap rates are likely to extend their fall as sentiment improved on the ceasefire, and government bond buying is expected to resume. Any major moves will depend on further cues on rate cuts, traders said.
The rates fell 2-3 basis points in the previous session.
The one-year OIS rate was at 5.63%, while the two-year OIS rate was at 5.53%, and the most liquid five-year OIS rate was at 5.65%.
KEY INDICATORS: ** Brent crude futures LCOc1 down 0.35% to $64.73 per barrel, after rising 1.64% in previous session ** Ten-year U.S. Treasury yield US10YT=RR at 4.4531%; two-year yield US2YT=RR at 3.9893% ** The RBI to conduct one-day variable rate repo auction for 250 billion rupees ($1 = 84.8570 Indian rupees).