MUMBAI, July 1 (Reuters) – Indian government bonds are expected to have a muted start to the quarter on Tuesday, as investors would await fresh cues after yields crept up in June, breaking a three-month declining streak.

The yield on the benchmark 10-year bond is expected to trade between 6.31% and 6.33%, a trader at a private bank said, after closing at 6.3241% in the previous session. The five-year 6.75% 2029 bond ended at 6.0013% on Monday.

Shorter-duration bonds outperformed their longer-duration counterparts for a second straight quarter in April-June, with the five-year bond yield plunging by 45 basis points, outpacing the 10-year bond yield that fell 26 bps.

“Whatever we witnessed in April-June is definitely not going to be repeated, as the scenario has completely changed and the Reserve Bank of India has moved to liquidity withdrawal mode, instead of infusion,” the trader said.

The RBI conducted a seven-day variable rate reverse repo on Friday, withdrawing 850 billion rupees ($9.9 billion) from the banking system which contributed to pushing up overnight rates.

The focus would remain on any follow-up action from the central bank this week, which will give more clarity on its comfort with liquidity and rates.

Demand may also remain impacted as the government did not announce a tweak to the debt supply pattern, which some investors had anticipated.

Indian states aim to borrow 2.87 trillion rupees through sale of bonds in this quarter, lower than the around 3 trillion rupees the market had expected. States sold more than 2 trillion rupees of bonds in April-June. RATES India’s overnight index swap rates are likely to remain stable on Tuesday after declining in the previous quarter.

The one-year OIS rate dropped 50 bps in April-June to 5.54%, while the two-year OIS rate declined 33 bps to 5.51%. The liquid five-year was at 5.71%, down 20 bps. KEY INDICATORS: ** Brent crude futures were 1.8% lower at $66.40 per barrel after easing 0.2% in the previous session ** Ten-year U.S. Treasury yield at 4.2163%; two-year yield at 3.7233% ** Indian states aim to raise 181 billion rupees via sale of bonds ($1 = 85.6610 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Ronojoy Mazumdar)