Bond yields traded lower on Tuesday as investors turned optimistic after data showing headline retail inflation eased in February gave rise to expectations for a cut in the central bank's key policy rate next month. India's headline retail inflation, which the Reserve Bank of India (RBI) closely tracks to set its interest rate policy, eased to 5.18 per cent in February compared with 5.69 per cent in January and 5.37 per cent a year ago. Some support also came with the report that RBI's plan to buy bonds worth up to 150 billion rupees ($2.23 billion) through an open market operation (OMO) on Thursday.
In the global market, U.S. Treasury debt prices rose on Monday, rebounding from an aggressive selloff last week, as investors tried to get back to neutral positions ahead of this week's two-day Federal Open Market Committee meeting. Furthermore, Oil prices fell in early trade, extending losses from the session before as concerns start to take hold that a six-week recovery will peter out as markets remain oversupplied.
Back home, the yields on new 10 year Government Stock were trading 3 basis points lower at 7.57% from its previous close at 7.60% on Monday.
The benchmark five-year interest rates were trading 1 basis point lower at 7.74% from its previous close at 7.75% on Monday.
The Reserve Bank of India has announced the auction of 91-days and 364-days Government of India Treasury Bills for notified amount of Rs 8,000 crore and Rs 6,000 crore respectively. The auction will be conducted on March 16, 2016 using 'Multiple Price Auction' method.