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MUMBAI: Indian government bond yields were higher on Monday, tracking US Treasury yields, with inflation worries flagged by the Reserve Bank of India further hurting investor appetite. The benchmark 10-year government bond yield was at 7.2955% as of 0500 GMT.

The yield rose 8 basis points in last two sessions and ended at 7.2639% on Friday.

The new 10-year 7.26% 2032 bond yield was at 7.2771%.

India bond yields up before debt sale, RBI inflation comments add to stress

“The rapid move in US 10-year yield to 3.00% is a sentiment dampener, and we are unlikely to see any major downside in Indian bond yields this week,” a trader with a state-run bank said.

The 10-year US Treasury yield touched 3% mark for the first time in a month on Monday, after Germany reported a record rise in monthly producer prices, which leapt 37.2% from the same time last year and 5.3% from June.

These prices are seen as a leading indicator for inflation.

Closer home, members of the Reserve Bank of India’s monetary policy committee said outlook on inflation was highly uncertain, and bringing it closer to the target of 4% was essential to help sustain India’s economic growth over the medium term.

India’s consumer inflation dipped to 6.71% in July, easing for the third month in a row, but remained above the RBI’s mandated target band of 2-6% for a seventh straight month.

Inflation may ease below 6% by the fourth quarter of this financial year, bringing an end to the current cycle of rate hikes, analysts said over the weekend.

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