The 10-year benchmark 7.26% 2033 yield ended at 7.1196%, and the 10-year yield dropped 20 basis points (bps) in April. "There is bullishness after the policy pause, as the market is not expecting any more hikes," said Rajeev Pawar, head of treasury at Ujjivan Small Finance Bank.
"Still, bonds have rallied quite a lot and we may see some consolidation around the current levels."
In the first week April, the Reserve Bank of India (RBI) held rates steady, defying a widely expected 25 bps increase.
Market participants expect the central bank to maintain a prolonged pause, even after RBI Governor Shaktikanta Das said the pause was for April policy only and it was not a pivot.
Bets of an extended pause further gained momentum after March retail inflation data fell within the central bank's target band of 2%-6%, with economists expecting it to fall below 5% for April.
Aggressive purchases by foreign banks was one of the major drivers of the decline in yields, amid broader expectations of a pause by the U.S. Federal Reserve, following a hike next week.
The Fed's policy decision on May 3 is a key driver for yields during the month.
Barclays rates strategist Ashish Agrawal expects the RBI to pause rates for the current financial year and for the benchmark yield to trade in the 6.75%-7.00% range by the end of this fiscal.
"Foreign banks' current purchases could be them building trading positions given the bullish momentum," he said. These banks bought bonds worth about 162 billion rupees ($1.98 billion) on a net basis from April 6 to April 26, according to data from Clearing Corp of India. ($1 = 81.7860 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sonia Cheema)
