New Delhi, June 4 -- Indian government bonds gained on Thursday, with yields easing amid reports of potential tax relief measures for debt investors. However, expectations of a possible repo rate hike by the Reserve Bank of India (RBI) capped gains in bond prices.

India's benchmark 6.48% 2035 bond yield declined by 2 basis points (bps) to 7.0033%. The US 10-year Treasury yield eased to 4.48%. Bond yields move inversely to prices.

According to a Reuters report, the Indian government is considering scrapping capital gains tax on foreign portfolio investments (FPIs) in government securities, a move expected to bolster foreign inflows into the domestic debt market.

Foreign investors have net purchased $1.4 billion worth of Indian bonds so ...