MUMBAI: Indian federal bond yields inched higher in early trades on Friday as higher crude oil prices triggered concerns that inflationary pressures may rise in the economy.
India's inflation rate is vulnerable to world oil price swings as the country imports nearly 80 percent of oil requirements. The government has deregulated petrol prices, but controls diesel and cooking gas prices.
Brent crude rose above $124 on Friday, on track for a fifth straight weekly gain, as worries over Iranian supply and upbeat US economic data offset concerns that high oil prices could snuff out demand.
At 9:21 a.m. (0351 GMT), the 10-year benchmark bond yield was at 8.21 percent from Thursday's close of 8.20 percent.
The government is due to auction 120 billion rupees ($2.44 billion)of bonds on Friday, and the Reserve Bank of India has offered to buy an equal amount through open market operations, including the current 10-year benchmark paper.
Expectations that the government will likely hold an unscheduled debt auction next week as part of its efforts to rein in an expanding fiscal deficit also weighed.
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