MUMBAI: Indian federal bond yields were steady on Friday as traders awaited inflation data around noon (0630 GMT) for cues on the central bank's policy action on May 3.
Traders said they expected some selling to emerge before a $2.7 billion debt sale later in the day.
At 10:10 a.m. (0440 GMT), the yield on the most-actively traded 8.08 percent 2022 bond and the 10-year 7.80 percent 2021 bond were both unchanged at 8.21 percent and 7.93 percent respectively.
The market was shut on Tuesday and Thursday for local holidays.
Total volume on the central bank's electronic trading platform was a meagre 4.4 billion rupees ($99 million), compared with an usual 10-15 billion rupees traded in the first hour of trade.
The central bank is set to auction 120 billion rupees ($2.7 billion) of bonds on Friday. Bidding ends at 0700 GMT and the results are expected after 0900 GMT.
"The market is still reeling under the pain of the last auction. Today's inflation data will set the tone but supplies are likely to keep sentiment subdued," a senior dealer with a private bank said.
"The 8.08 percent 2022 bond and the 8.26 percent 2027 bond are fine but it's the short-bond, the illiquid 7.59 percent 2016 bond that is worrying the market," the dealer said.
Traders said there was no talk yet of any likely devolvement, but if inflation data was higher than expectations there was a chance of primary dealers coming under pressure to buy some of the stock.
The wholesale price index probably rose 8.36 percent in March from a year earlier, slightly higher than February's 8.31 percent rise as fuel and manufacturing prices continued to climb, a Reuters poll showed on Monday.
"The market would mainly be taking cues from the inflation data. Till then it will be range bound," said Chetan Shenoy, an associate vice president at IndusInd Bank.
"The 2022 bond cut-off at the sale could be around 8.22-8.25 percent," he said.
Traders are expecting the central bank will raise key rates by 25 basis points at its annual policy release next month, but the inflation data will be key to cement these views.
The benchmark five-year swap rate and the one-year rate were both down 1 basis points, at 8.08 percent and 7.50 percent respectively.
US Treasuries were little changed in Asia, with support at 3.5 percent in the 10-year notes holding up, helping to counter pressure from worries about rising inflation ahead of consumer price data later in the day.
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