MUMBAI: Indian government bond yields fell marginally in the early session on Tuesday as U.S. peers reversed course, but expectations of a debt sale capped a major fall in yields.

The 10-year benchmark 7.26% 2033 bond yield was at 7.0263% as of 10:00 a.m. IST, after closing at 7.0302% in the previous session.

Indian states aim to raise 255.50 billion rupees ($3.12 billion) through the sale of bonds later in the day, and the quantum is not only higher than scheduled but also the highest in the last two months.

The state debt sale comes after they borrowed 185.50 billion rupees through a similar auction last week.

“Had it not been for heavy state debt sale, we could have seen benchmark yield easing to 7%,” a trader with a primary dealership said.

U.S. yields eased in Asian trading hours on Tuesday, as bond traders welcomed a tentative deal to suspend Washington’s borrowing limit until 2025 and avert a debt default.

India bond yields rise as US peers continue upward march

The 10-year yield dipped six basis points (bps) to 3.76%, after rising by over 40 bps in the last two weeks as strong data and hawkish commentary from U.S. Federal Reserve officials raised bets of another rate hike.

The odds of another 25 bps hike on June 14 stand at 61%, up from 40% last week and around 5% at the beginning of May.

Apart from state debt sale, traders await India’s growth data for January-March and the previous financial year which will be detailed on Wednesday.

A Reuters poll of economists predicted the reading at 5% on-year, up from 4.4% in October-December. The data could provide some clarity on the thinking of the Reserve Bank of India when it announces its monetary policy decision on June 8.