MUMBAI: India's 10-year government bonds rallied, sending yields down 21 basis points to 8.47 percent on Tuesday after the central bank on Monday cut an overnight interest rate, further unwinding measures taken to defend the rupee.

The Reserve Bank of India on Monday cut the Marginal Standing Facility (MSF) rate by 50 basis points to 9.0 percent.

In the overnight indexed swap market, the one-year rate plunged to 8.35 percent from 8.64 percent at the previous close.

Meanwhile, the partially convertible rupee was trading stronger on the day at 61.73/78 per dollar versus its close of 61.79/80 on Monday.