Indian bond yields are seen steady this week as inflation - which has broadly risen over the past five months - continues to retreat from a recent peak.
But the decline in inflation will not trigger any significant uptick in bond prices as a robust economy has snuffed out hopes of interest rate cuts and because the central bank is planning to drain cash building up in the market.
"By and large, I expect bonds to be stable this week," said Neeraj Gambhir, head of proprietary trade at ICICI Bank.
"Inflation could show a significant fall because of the base effect, which will be the focus of trading. Coupled with that, liquidity is good, with foreign exchange inflows strong."
Annual inflation, as measured by wholesale prices, has been around six percent through 2004 as rising income in the expanding economy encouraged higher consumption.
But the rate slowed to 5.84 percent on February 14 from a nine-month high of 6.21 percent on January 10.
The slowdown was the result of the so-called 'base effect', the comparison with high prices a year-earlier, and raised hopes bond yields would not rise much for now.
The 10-year yield was at 5.2590 percent on Saturday, up some 32 basis points from its historic low hit in October.
The central bank expects inflation to fall to around 4.0 to 4.5 percent for the year to the end of March, though analysts surveyed by Reuters last week forecast 4.75 percent.
The market will also wait to see when the central bank starts to issue market stabilisation bonds - bonds worth 600 billion rupees, aimed at absorbing excess money generated by strong foreign investment inflows.
Some traders expect an early start to the sale because money is piling up on the back of strong foreign inflows.
But any delay could support the market as some of the surplus cash would find its way into bonds.