MUMBAI: Indian government bond yields traded marginally lower on Tuesday as domestic inflation eased, although traders say that the benchmark is seeing stiff resistance at around the 7% mark.

The 10-year benchmark 7.26% 2033 bond yield was at 6.9916% as of 10:00 a.m. IST, after closing at 7.0062% in the previous session.

"At the current levels, most of the positives are factored in, and we would need fresh aggressive buying for the 7% handle to be comfortably taken," a trader with a private bank said.

Bond yields dipped after India's retail inflation eased to an 18-month low of 4.7% in April from 5.66% in the previous month, lower than Reuters' forecast of 4.80% and below the central bank's upper tolerance limit for the second consecutive month.

Even though some economists say that retail inflation in May is likely to fall further towards 4%, a level last seen in January 2021, bond traders say the market needs stronger triggers for yields to fall.

The Reserve Bank of India (RBI) targets inflation at 4%, with a tolerance level stretching to two percentage points on either side. The RBI in April surprised the market with a status quo on rates, against expectations of a 25-basis point hike.

With yield movement largely flat, traders will remain focused on debt supply. Five Indian states aim to raise 85 billion rupees ($1.04 billion) through the sale of bonds later in the day, slightly lower than scheduled.

New Delhi seeks to raise 330 billion rupees via the sale of bonds, including 140 billion rupees of the benchmark paper on Friday.

Meanwhile, the two-year and 10-year U.S. yields remained around the 4%-3.50% mark, with the major focus on the Federal Reserve's interest rate trajectory in the coming months. ($1 = 81.7800 Indian rupees) (Reporting by Dharamraj Dhutia Editing by Sonia Cheema)