Indian government bonds moved sideways early on Friday, as traders braced for heavy debt supply, while range-bound oil prices and softer U.S. Treasury yields offered some breathing room. New Delhi is set to auction 320 billion rupee ($3.32 billion) worth of three- and 30-year bonds later ‌in the ⁠day. Brent has ⁠hovered near $85 a barrel this week, while the 10-year U.S. Treasury yield stayed close to 4.55% on curbed expectations of aggressive Federal Reserve rate hikes. With external pressures contained, the Indian benchmark 6.94% 2036 bond yield traded rangebound at 6.7519% as of 10:10 a.m. IST, compared with Thursday's close of 6.7478%. Bond yields move inversely to prices. The 10-year ⁠yield has ‌slipped nearly 5 basis points over the last two sessions, even as a fragile U.S.-Iran truce frayed into daily attacks ⁠in the Middle East. Market has shown firm demand for Indian government bonds despite a softer backdrop this week marked by higher-than-expected CPI, renewed escalation in the U.S.-Iran conflict, and rupee weakness, economists at DBS said in a note. Foreign participation has also picked up, which should support the auction and keep primary-market demand healthy, they said. Overseas investors bought about 16.5 billion rupees ‌of bonds under the fully accessible route this week on expectations of a possible inclusion on the Bloomberg Index.India bonds tread water ahead of large debt saleIndian government bonds traded sideways early Friday as traders awaited a significant debt auction. Oil prices remained range-bound, and U.S. Treasury yields offered some market stability. Foreign investors showed increased interest, supporting bond demand and the upcoming auction. Short-term interest rates rose as banking system liquidity tightened. The benchmark bond yield traded rangebound, reflecting current market conditions. Foreign banks turned buyers on Thursday, snapping ⁠a three-session selling streak, net buying more than 50 billion rupees ($518.97 million) of bonds, CCIL data showed.RATES India's short-term overnight index swap rates rose as banking-system liquidity tightened. The liquidity surplus shrank to 832 billion rupees on Wednesday from 1.3 trillion rupees in the previous session. The 1-year was up 2 bps at 5.9150%, while the 2-year rate was flat. The 5-year rate was steady at 6.3425%. ($1 = 96.3450 Indian rupees)