(Updates for market close) By Dharamraj Dhutia MUMBAI, Oct 8 (Reuters) – Indian government bonds ended largely unchanged on Wednesday as traders booked profits, with the 10-year benchmark yield struggling to slip below the key 6.49% level throughout the session. The yield on the 10-year benchmark note came off intraday highs to end at 6.5030%, after Tuesday's 6.5101% close. Bond yields move inversely to prices. A break below 6.49% level could open room for further declines. Bond market bulls drove the early part of the trading session, but the 10-year bond yield was unable to break below 6.49%. The overall sentiment, however, remains positive on states and central governments' reduced debt supply, and Reserve Bank of India's dovish stance. "After the recent increase in bond yields, bond valuations have become attractive, especially at the longer end of the curve. Going ahead, we expect rangebound movement in yields and expect state debt yield curve to outperform over the medium term," Puneet Pal, head of fixed income at PGIM India Mutual Fund, said. State governments said they will raise 2.82 trillion rupees ($31.77 billion) through bond sales in the October-December quarter, while traders had expected around 3.25 trillion rupees. The upbeat sentiment was evident in Tuesday's state auction demand, with the RBI's dovish tone also providing a boost. The RBI kept its policy rate unchanged on October 1, but lowered its inflation projection, and said it has opened the doors for further rate cuts. Most market participants now expect the RBI to cut rates in December. RATES India's overnight index swaps (OIS) ended lower, led by the longer end of the curve, as traders priced in further rate cuts. The one-year OIS rate ended at 5.41%, while the two-year rate closed 2 bps lower at 5.3450% and the five-year rate also settled 2 bps lower at 5.6150%. ($1 = 88.7690 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman and Harikrishnan Nair)
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