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Indian government bond yields are expected to open marginally lower on Tuesday as oil prices declined, though any major move is likely to be capped as domestic inflation eased and came roughly in line with estimates.

The benchmark 10-year yield is likely to be in a 7.26%-7.32% band for the session, a trader with a private bank said.

The yield ended lower for a sixth straight session at 7.2866% on Monday and has declined 19 basis points in six sessions.

"The move in oil prices could lead to some bullish bias at the open, but we may not see a runaway rally," the trader said.

"Inflation data is largely in line with expectations, which reinforces the belief that there may not be any aggressive rate hikes."

The benchmark Brent crude contract fell 3% on Monday, as the Organization of the Petroleum Exporting Countries (OPEC) cut its 2022 global demand forecast, while rising COVID-19 case numbers in China clouded the outlook for fuel consumption in the world's top crude importing nation.

Falling oil prices could help control inflationary pressures in India which is one of the major importers of the commodity.

India's annual retail inflation eased to a three-month low of 6.77% in October, helped by a slower rise in food prices and a higher base effect.

That was slightly higher than the 6.73% forecast by economists in a Reuters poll and above the central bank's tolerance limit. The September reading was 7.41%.

Aditi Nayar, chief economist at ICRA, expects the central bank to hike the repo rate by 35 basis points in December, given that inflation is expected to further moderate in November.

The Reserve Bank of India has hiked rates by 190 bps to 5.90% since May, including three consecutive rate hikes of 50 bps each.

KEY INDICATORS:

** Brent crude futures was 0.3% lower at $92.90 per barrel, after falling 3% in the previous session

** 10-year U.S. Treasury yield was at 3.8649% and the two-year note at 4.3887%

** Four states aim to raise 88 billion Indian rupees ($1.09 billion) via the sale of debt