MUMBAI: Indian government bond yields eased marginally early on Tuesday after a break, tracking a similar move in US peers, while a heavy supply of debt from states limited the move.

The 10-year benchmark bond yield was at 7.2577% as of 10:00 a.m. IST after ending the previous session at 7.2704%, a trader with a state-run bank said. Indian markets were shut on Monday for a local holiday.

“With the Treasury yield back to 4.40%, the Indian benchmark yield should be in the close vicinity of 7.25% for the day, but if demand for state debt is not on expected lines, we could again see some selloff,” a trader with a private bank said.

US yields declined on Monday, with the 10-year yield briefly slipping below the crucial 4.40% mark, after a larger-than-expected drop in monthly home sales data.

New home sales dropped 5.6% to a seasonally adjusted annual rate of 679,000 units last month, below the 723,000 units estimate of economists polled by Reuters.

September’s sales pace was revised lower to 719,000 units.

Softening economic data, including a reading on inflation two weeks ago, has fueled expectations that the US Federal Reserve will not hike rates any further, with odds of a rate cut in May rising further.

Meanwhile, heavy debt supply from states continued to weigh on investor sentiment as they aim to raise 353 billion rupees ($4.23 billion) via a sale of bonds later in the day.

India bond yields seen little changed amid lack of fresh cues

The quantum is higher than 295 billion rupees as per the calendar and also the largest amount since the end of March.

Traders are also awaiting a decision regarding the inclusion of Indian bonds in the Bloomberg Global Aggregate Index after JPMorgan added the notes to its emerging market index in September.

The decision is due in the coming days.