At 10:45 a.m. (0450 GMT), the 10-year benchmark bond yield was up 2 basis points (bps) at 8.34 percent, after falling to 8.31 percent in initial trades. The market was closed on the previous two days for local holidays.
Total volume on the central bank's electronic trading platform was low at 19.6 billion rupees ($427 million), compared with the normal 30-40 billion rupees dealt in the first hour and half of trade.
"Weekly inflation is back into double digits which is hurting bonds," said Dinesh Ajuja, a fund manager at SBI Funds Management.
"I guess bonds should remain subdued through the day as we have the auction today and lots of data releases in the US as well," he added.
India's food price index rose 10.05 percent, its highest in nearly six months, and the fuel price index climbed 12.55 percent in the year to Aug. 20, government data on Thursday showed. The primary articles index was up 12.93 percent, compared with an annual rise of 12.40 percent a week earlier.
"Bond yields are higher in reaction to the high weekly inflation and position cutting ahead of the auction later today," said Reshma Nayak, a fixed income dealer with Saraswat Co-operative Bank in Mumbai.
Traders said the 10-year could find support around 8.37 percent and forecast a 8.30-8.38 percent band for next week.
The results of the bond auction due after 0900 GMT would be key for direction later in the day.
The government is selling 30 billion rupees each of 7.99 percent 2017 and 8.30 percent 2040 bonds and 50 billion rupees of 8.13 percent of 2022 bond.
The benchmark five-year overnight indexed swap rate was 1 bp higher at 7.02 percent while the one-year rate was up 2 bps at 7.86 percent.
US Treasuries held firm in Asia on Friday as the latest jobs and factory data for the United States stoked fears of a dismal August payrolls report and encouraged bets the Federal Reserve will introduce more stimulus.
In Asian trade, the benchmark US 10-year note was trading at 2.13 percent, down 1 bp from late New York trade on Thursday, when it had dropped 9 basis points.
Brent crude was steady above $114 a barrel, headed for its second straight weekly gain, while investors eyed key US jobs data for clues on whether the world's largest oil consumer would be able to dodge a recession and leave demand growth intact.
Copyright Reuters, 2011