MUMBAI: Indian government bond yields rose in early trade on Thursday, with the benchmark yield back above the 7.35% mark, as their US peers resumed their upward journey after a brief fall earlier in the week.

The 10-year benchmark bond yield was at 7.3605% as of 10:00 a.m. IST, after ending at 7.3408% in the previous session.

“The downward move in US yields was because of a large player’s move and hence it has not sustained, and unless we see multiple days of 4.70%-4.80% range, we cannot rule out a breach of 5% again,” a trader with a state-run bank said.

US yields rose after an auction showed weak demand and following data that indicated new-home sales accelerated in September, affirming market expectations of prolonged higher-for-longer interest rates.

The benchmark US 10-year yield jumped 11 basis points on Wednesday and was over 4.95%, with all eyes on the Federal Reserve’s monetary policy decision next week.

Although markets do not expect any rate action, the focus will remain on the guidance.

The benchmark Brent crude contract was trading around $90-per-barrel.

Any move in oil prices is crucial for net importers like India, whose retail inflation has stayed above the Reserve Bank of India’s (RBI) 4% target for several months.

Markets also await a fresh sale of bonds, with New Delhi slated to raise 300 billion rupees ($3.61 billion) on Friday, which includes a new three-year paper.

India bond yields rise marginally after central bank policy minutes

Meanwhile, traders are watching for the first debt auction by the RBI, after it earlier this month said it aims to sell bonds via auctions to absorb liquidity.

The central bank will conduct open market sales of bonds once government spending picks up and there is an improvement in the durable liquidity surplus, two sources aware of the development told Reuters last week.

Market participants expect the central bank to conduct OMO sales worth 500 billion rupees in the current quarter.