Singapore: Despite the recent correction in Indian bond yields, domestic catalysts suggest a largely positive outlook for the bond market in the short-term, a report said on Tuesday.

Global drivers are also supportive as US yields harbour expectations of a dovish US Fed and a likely rate cut at the meeting later this month.

India's 10-year (generic) bond yields have corrected sharply from 6.75 per cent ahead of the budget to 6.45 per cent on Monday, according to Singapore's DBS Group Research Report.

Correction in the rate sensitive 2Y yields was relatively smaller, from 6.23 per cent to 6.17 per cent, having already baked in monetary easing expectations, wrote the bank's Economist Radhika Rao and Rate Strategist Eugene Leow in a report on Tuesday.

"This has led to flattening in the yield curve versus a month ago, with 6.4 per cent offering support for the 10Y, while 2Y yields stay above 6 per cent.

A strong dovish signal will be the next trigger for a break below," the duo said in the report.

Domestic catalysts for bonds are largely positive in the short-term, barring Monday's downbeat trade numbers, they said.