MUMBAI: Indian federal bond yields steadied on Monday as traders awaited inflation data due around 0630 GMT for cues on the future course of monetary policy action by the central bank.
The wholesale price index likely rose 8.43 percent in April from a year earlier, slower than March's 8.98 percent increase, due to base effect, a Reuters poll showed last Thursday.
At 10:20 a.m. (0450 GMT), yields on the 10-year benchmark bond and the second most-traded 8.13 percent, 2022 bond were both steady, at 8.27 percent and 8.42 percent, respectively.
Yields had initially risen following a steep petrol price increase over the weekend. The 10-year yield had risen to 8.29 percent and the other to 8.47 percent.
Total volume on the central bank's electronic trading platform was at 21.20 billion rupees ($471 million), compared with the normal 20 billion to 30 billion rupees traded in the first hour and half.
Traders expect the 10-year yield to move in a 8.25 percent 8.30 percent range until the inflation data.
State-run refiners raised petrol prices by about 8.6 percent from Sunday, a record hike that will fuel inflation in Asia's third-largest economy.
"The petrol price hike has been quite steep, so some reaction was seen. But the inflation number will be the key to gauging likely central bank action going ahead," a senior dealer with a primary dealership said.
The benchmark five-year swap rate was down 4 bps at 8.14 percent while the one-year rate was up 1 bp at 8.04 percent.
"If the inflation data is a major surprise on the upside, we can see bonds and swap rates rising by around 5-7 basis points," a dealer with a foreign bank said.
Traders are also awaiting the details of the government's $2.7 billion bond sale this week, due after market hours, for cues.
Global commodity prices especially oil, which is India's biggest import item, are also being watched.
US oil futures slipped to as low as $98.35 a barrel on Monday as the dollar index rose to a six-week high on worries that Greece may restructure its sovereign debt.
Traders said a further drop in US yields in Asian trade was preventing a sharp upside to yields in the domestic bond market. The US 10-year benchmark bond yield was at 3.15 percent, compared to 3.18 percent in late New York trade on Friday.
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