MUMBAI, April 18 (Reuters) - Indian government bond yields edged lower in early trading on Thursday, tracking a pullback in oil prices and U.S. Treasury yields which provided a sense of calm to nervous investors.
The benchmark 10-year yield was at 7.1566% as of 10:00 a.m. IST, following its previous close at 7.1860%.
"For now, there is some support to sentiment for local bonds, and the benchmark yield should trade in 7.15%-7.20% band for today and tomorrow," a trader with a private bank said.
U.S. yields came off their recent highs, slowing a week-long selloff that had pushed the benchmark 10-year yield to 4.70%, and the two-year yield to over 5%, their highest levels in five months.
The relentless rise in U.S. yields was caused by changing expectations of rate cuts by the Federal Reserve in 2024 following recent economic data and commentary from Fed officials.
Futures markets are now expect less than 50 basis points (bps) of rate cuts by end of this year, with the first rate cut fully priced in November.
This is sharply lower than the 150 bps of cuts widely expected at the start of the year, according to CME's FedWatch Tool.
Meanwhile, oil prices eased overnight, with the benchmark Brent crude contract around $87 per barrel, as rise in U.S. commercial inventories and weaker Chinese economic data offset supply worries.
Oil prices had risen amid worries that conflict in the Middle East could impact supply. Higher prices impact India's retail inflation as it is a major oil importer, and may make the Reserve Bank of India's 4% target more difficult to achieve.
New Delhi will sell Treasury bills worth 270 billion rupees later in the day, and bonds worth 240 billion rupees ($2.87 billion), including a new 40-year note, on Friday. ($1 = 83.5250 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Varun H K)
