MUMBAI: Indian government bond yields were up in early session on Monday, tracking a similar movement in US peers, while investors awaited inflation data.

The benchmark 10-year yield was at 7.3728% as of 10:00 a.m., after closing at 7.3627% on Friday.

The yield jumped 9 basis points (bps) last week, its biggest such move in more than four months.

The constant rise in US yields is bound to have some impact on local bonds and if core inflation stays above 6%, there may be some more selloff tomorrow, a trader with a state-run bank said.

The US 10-year yield hit the 3.75%-mark for the first time in five weeks on Friday, while the two-year yield stayed above the 4.50% handle, as investors continued to digest strong economic data released earlier this month and awaited the latest consumer price index and retail sales figures.

The US January consumer price index data is due on Tuesday and is expected to show that headline and core consumer prices rose 0.4% for the month.

Indian bond yields seen little changed ahead of debt supply

Meanwhile, higher food prices likely nudged up India’s annual retail inflation last month from a 12-month low in December, but it stayed within the Reserve Bank of India’s targeted range for the third consecutive month, a Reuters poll of economists predicted.

The inflation rate is forecast to have risen to 5.9% in January from 5.72% in December.

It ran above the RBI’s upper tolerance limit of 6% for the first 10 months of 2022, but fell below it in the last two, largely because of a fall in food inflation. Sentiment has been bearish after the Reserve Bank of India raised the repo rate by 25 bps last week and left the door open to more tightening, highlighting core inflation concerns.

Some analysts have also changed their call on the terminal repo rate and now expect the RBI to hike the repo rate by 25 bps in April, which will take it to 6.75%, a level last seen seven years ago.