MUMBAI: Indian government bond yields are likely to be largely unchanged in early session on Tuesday, with traders taking cues from demand at the last state debt auction of the quarter.

The benchmark 7.26% 2033 bond yield is expected to be in the 7.04%-7.08% range, after closing at 7.0654% in the previous session, a trader with a primary dealership said.

Twelve Indian states aim to raise 224.50 billion rupees ($2.74 billion) through the sale of bonds maturing in seven years to 30 years.

The quantum is marginally lower than scheduled, but four times of what states raised last week.

This will be followed by the central government’s debt sale on Friday, where it aims to raise 330 billion rupees. “Many were expecting a far lower quantum, but it would be interesting to see which investor category goes for it and at what levels,” the trader said.

Bond yields have remained elevated over the past few sessions, as the Indian and US central bank turned hawkish, delaying rate cut bets.

While members of India’s monetary policy committee appeared increasingly divergent in their views on the future course of interest rate hikes, they remained worried about inflation risks.

Indian bond yields seen steady at start of quarter’s last week

In June, the Reserve Bank of India kept its key lending rate steady for a second straight meeting, but signalled monetary conditions will remain tight for some time as it looks to attain the 4% inflation target.

Kotak Mahindra Bank said that with increasing uncertainty on the monsoon front, risks to food inflation are skewed to the upside, and it expects the benchmark yield to trade in 7.00%-7.15% in the near term.