MUMBAI, May 2 (Reuters) – Indian government bond yields moved with a marginal upside bias in early deals on Friday, with the major focus remaining on the demand for a new 10-year paper that will be sold at the weekly auction later in the day.

The benchmark 10-year bond yield was at 6.3573% as of 10:00 a.m. IST, after closing at 6.3559% in the previous session.

The benchmark bond yield declined 22 basis points in the first month of the new financial year, its biggest such drop since March 2020, and this was after a 15-bps decline in March.

“Bond prices have rallied quite a bit in last few weeks, and the move has been very rapid, which has led to some consolidation now,” trader with a state-run bank said.

“If the cutoff for the new 10-year paper is aggressive, we could see some follow up buying in secondary market,” the trader said.

New Delhi aims to raise 360 billion rupees ($4.29 billion) through the sale of bonds, including 300 billion rupees of a new 10-year bond, which will replace the existing benchmark bond in coming weeks.

Underlying sentiment continued to remain bullish, with the Reserve Bank of India set to buy bonds worth up to 1.25 trillion rupees in four tranches in the next three weeks. The central bank bought bonds worth 1.20 trillion rupees in April.

Meanwhile, market participants will continue to remain vigilant for any news related to geopolitical tensions between India and Pakistan. RATES

India’s overnight index swap rates were marginally lower as receiving bias persisted, despite swaps dropping for four consecutive months through April.

The one-year OIS rate was not yet traded after dropping 37 bps last month, while the two-year OIS rate was marginally lower at 5.50%, after falling 34 bps in April.

The most liquid five-year swap was also slightly down at 5.61%, after 29-bps fall in April. ($1 = 83.9290 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman)