MUMBAI: Indian government bond yields were little changed on Tuesday, driven by a rise in U.S. yields that offset the positive impact of the government announcing a reduction in the supply of shorter-dated Treasury bills.

The 10-year yield was at 7.0419% as of 10:00 a.m. IST, following its previous close of 7.0465%. The 7.18% 2033 bond yield was at 7.0850% after ending at 7.0925%.

"Longer-dated bonds are reacting more to U.S. yields, and had it not been for the cut in T-bill supply, we could have seen a couple of basis points of rise," a trader with a private bank said.

U.S. yields rose as traders booked profit after the recent decline and as Federal Reserve officials pointed to uncertainty over the central bank's ability to cut rates if inflation remains sticky.

The 10-year U.S. yield was around 4.45%, after hitting 4.31% last week.

The odds for a rate cut in September eased marginally to 65%, while the futures market is now expecting around 41 basis points of rate cuts in 2024, after fully pricing in two rate cuts on easing inflation, according to the CME FedWatch tool.

Meanwhile, the central government announced after market hours on Friday that it will reduce the supply of T-bills by 600 billion rupees ($7.20 billion) till the end of June.

It added it will sell 40 billion rupees of 91-day, 182-day and 364-day T-bills every week, down from 100 billion rupees, 50 billion rupees and 70 billion rupees scheduled earlier.

Before the announcement, Reuters reported that traders were expecting a cut in the government's short-term borrowing to reduce the liquidity deficit.

This comes after the government bought back bonds worth only around 126 billion rupees, against a notified amount of 1 trillion rupees and aims to buy back securities worth up to 600 billion rupees later in the day.

($1 = 83.2960 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman )