MUMBAI, Dec 8 (Reuters) - Indian government bond yields were marginally lower on Thursday, tracking a slump in oil prices as well as treasury yields, on expectations that U.S. inflation and interest rates have peaked.
However, the downward move in Indian bond yields remained capped ahead of fresh supply via weekly debt auction on Friday, which includes the sale of benchmark notes.
The benchmark 10-year yield was at 7.2606% as of 10 a.m. IST. The yield ended higher for a fourth straight session at 7.2693% on Wednesday.
"Though global factors are bond-supportive, traders are waiting for tomorrow's bond auction to gauge investor comfort at current levels, after yesterday's policy decision and guidance," a trader with a primary dealership said.
Market sentiment also remained cautious after the Reserve Bank of India's monetary policy committee raised its key policy rate by 35 basis points to 6.25%, the highest in over three years and highlighted inflation concerns.
Most market participants expect another 25 bps move in February.
New Delhi was set to raise 280 billion rupees ($3.40 billion)through sale of bonds on Friday, which includes 110 billion rupees of benchmark paper.
Meanwhile, U.S. Treasury prices continued their uptrend, with the yield on the 10-year note dropping to 3.40% on Wednesday, its lowest in nearly three months.
The Federal Reserve monetary policy decision is due next week, with markets broadly expecting a 50 basis points hike. The Fed has raised rates by 375 basis points so far in 2022.
Meanwhile, oil prices continued their downward momentum, with the benchmark Brent crude contract dropping to its lowest level for 2022 on Wednesday, driven by bigger-than-expected increases in U.S. fuel stocks.
India is one of the largest importers of crude oil, and price movements have direct impact on retail inflation. The data for November is due on Monday, and the reading is expected to fall further after 6.77% on-year rise in October. ($1 = 82.3100 Indian rupees) (Reporting by Dharamraj Dhutia Editing by Nivedita Bhattacharjee)
