traded in a tight range in early deals on Tuesday, as investors awaited the state debt supply expected later in the day, and the central bank's monetary policy decision due later this week. The yield on the new benchmark 10-year bond was at 6.2171% as of 10:20 a.m. IST, compared with the previous close of 6.2144%.


"The higher-than-expected GDP number toned down future rate cuts expectations in the market, and we're now waiting to hear from the horse's mouth (the central bank) for further direction," said Debendra Kumar Dash, senior vice president of treasury at AU Small Finance Bank.
India's gross domestic product (GDP) surged 7.4% in the January-March quarter, much faster than the forecast of 6.7% in a Reuters poll. The Reserve Bank of India is widely expected to cut rates by at least 25 basis points in its monetary policy decision due on June 6, with the focus also on the Governor's commentary to gauge the central bank's rate easing trajectory.

State Bank of India, however, believes there should be a 50-basis-point cut to reinvigorate the credit cycle.

India's widening liquidity surplus supported the sentiment, with the daily average surplus at its highest level since July 2022. In May, the daily average surplus stood at nearly 1.71 trillion rupees, more than 20% higher than April.

Meanwhile, Indian states are set to sell bonds worth 294 billion rupees ($3.44 billion) later in the day, the highest quantum since the start of the financial year.
Volumes in overnight index swaps (OIS) were muted in early trading, and the rates are expected to remain range-bound during the day, traders said.

The one-year OIS rate was yet to be traded, while the two-year OIS rate was down 1 basis point at 5.44%

The most liquid five-year was slightly lower at 5.65%.

($1 = 85.4470 Indian rupees)