Bond yields trade lower on Tuesday, as investors turned optimistic after much softer-than-expected inflation data fuelled hopes of a rate cut by the central bank at its next policy review in August. Data released late on Monday showed consumer inflation easing to 2.18% in May, helped by a drop in food prices - the lowest since India started publishing an economy-wide consumer price index in 2012.
In the global market, U.S. Treasury yields rose on Monday after tepid demand at a 10-year Treasury auction offset strong demand at a three-year auction, while uncertainty about the Federal Reserve's policy outlook on Wednesday limited the move higher in yields. Furthermore, oil prices edged up, lifted by statements that OPEC-leader Saudi Arabia was making significant supply cuts to customers, although rising U.S. output meant that markets remain well supplied.
Back home, the yields on new 10 year Government Stock were trading 5 basis points lower at 6.47% from its previous close of 6.52% on Monday.
The benchmark five-year interest rates were trading 4 basis points lower at 6.67% from its previous close of 6.71% on Monday.