Indian government bond yields traded in a narrow range on Tuesday as investors assessed the implications of the recently announced US-Iran ceasefire while awaiting a major state government debt auction.

The yield on the benchmark 10-year government bond stood at 6.8693 percent, compared with 6.8704 percent in the previous session, indicating limited movement in the market. Bond yields and prices move inversely.

Market sentiment had initially improved following the announcement of a peace agreement between the United States and Iran, which triggered a decline in global crude oil prices and supported risk assets, including Indian bonds. Lower oil prices are generally positive for India as they help ease inflationary pressures and improve the country's external balance.

However, traders turned cautious as they awaited greater clarity on the ceasefire's implementation and durability. While the agreement has improved the outlook for global energy supplies and reduced immediate geopolitical risks, market participants remain watchful of developments in the region.

Domestically, investor attention shifted to the auction of state government securities, where states are scheduled to raise Rs 21,600 crore. The outcome of the debt sale is expected to provide cues on investor appetite for government-backed securities and could influence bond market direction in the near term.

The bond market continues to be supported by expectations of stable liquidity conditions and recent measures by the Reserve Bank of India aimed at encouraging capital inflows into debt markets.