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Indian government bond yields were little changed on Monday following a decline in oil prices, with the market downplaying the risk of broader regional conflagration after Iran's weekend attack on Israel.
The broader market sentiment was supported by a fall in local inflation data, traders said.
The yield on the benchmark Indian 10-year note ended at 7.1779%, after closing at 7.1794% in the previous session.
"Oil prices stabilised after Iran said that the retaliation was over. So that gave comfort to the market and we did not see any sharp movement in local bond yields," said Yogesh Kalinge, vice president at A.K. Capital Services.
Oil prices slipped by about 1% on Monday, after rising on Friday in anticipation of Iran's retaliatory attack, with prices touching their highest since October.
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Any further escalation of the conflict in the Middle East has the potential to amplify the commodity prices, especially crude oil, India Ratings and Research said in a note.
Higher commodity prices could impact domestic retail inflation.
India's annual retail inflation rate eased in March to a five-month low of 4.85%, helped by a drop in fuel prices but economists say a rate cut by the central bank is still some months away as food prices remain sticky.
Meanwhile, U.S. Treasury yields eased on Friday as the Middle East tensions spurred safe-haven buying. The U.S. yields were higher in Asian trade on Monday and were last at 4.57%.
Market participants have readjusted their rate-cut expectations from the Federal Reserve after an elevated U.S.
inflation reading last week.
Market bets on the U.S. central bank cutting its target rate in June fell to 27.1%, down from 53.2% a week earlier, according to the CME Group's FedWatch Tool.
Two Indian states will raise 19 billion rupees ($227.74 million) through the sale of bonds.
