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MUMBAI: Indian government bond yields were trading marginally higher as traders cut positions ahead of a debt auction on Thursday, while the market was largely unchanged in response to lower inflation readings in India and the United States.

The 10-year benchmark 7.26% 2032 bond yield was at 7.2244% as of 10:00 a.m. IST, after ending at 7.2134% on Wednesday.

Indian markets will remain shut on Friday due to a public holiday.

There is no major change in fundamentals even after softer inflation prints, and hence the focus has shifted to the debt sale and investor appetite, a trader with a state-run bank said.

New Delhi aims to raise 390 billion rupees ($4.76 billion) through the sale of bonds, which includes a new three-year as well as seven-year paper along with the liquid 14-year note.

“Unless we have some major fresh positive cues, the benchmark bond yield will likely continue to witness strong resistance at the 7.20% level on the downside,” the trader said.

The inversion of the US yield curve eased after data on Wednesday showed the US consumer price index (CPI) rose 0.1% last month after advancing 0.4% in February.

India bond yields little changed on continued profit booking

In the 12 months through March, the CPI rose 5.0%, the smallest year-on-year gain since May 2021.

However, the odds of a 25 basis point (bps) rate hike by the Federal Reserve in May stayed above 70% as core inflation remained elevated.

Meanwhile, India’s annual retail inflation for March was at 5.66%, below the central bank’s upper tolerance level of 6% for the first time in 2023 and lower than a Reuters forecast of 5.80%.

The reading was also the lowest since December 2021.

The preliminary estimate for April inflation is tracking at 4.6%, IDFC First Bank said in a note.

The inflation data comes after the Reserve Bank of India maintained status quo on policy rates last week, even as markets factored in a 25 bps rate hike.

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