MUMBAI, April 8 (Reuters) - Indian government bond yields rose in the early session on Monday, mirroring a jump in U.S. Treasury yields after strong economic data further pushed back expectations around the timing of the first rate cut by the Federal Reserve.
The yield on the benchmark 10-year was at 7.1438% as of 10:00 a.m. IST, after closing at 7.1232% in the previous session. The yield touched 7.1468% earlier, the highest level since Jan. 31.
"We can now gauge that the Fed rate cut expectations are clearly pushed back to the third quarter of the calendar year, and the upward swing in Treasury yields could be here to stay, which could put more pressure on local bonds," a trader with a primary dealership said.
U.S. yields jumped on Friday after data showed non-farm payrolls grew by 303,000 jobs in March compared with expectations for an increase of 200,000, while the unemployment rate slipped to 3.8% compared with forecasts of 3.9%.
The 10-year yield was over 4.40%, after hitting its highest level in more than four months. The two-year yield , a closer indicator of interest rate expectations, was also around similar levels and trading above 4.75%.
The strong data has further raised uncertainty over the timing of rate cuts, with the odds of a June action now dropping below 50%, while bets for aggregate cuts of 75 bps in 2024 also eased below the halfway mark, according to CME FedWatch tool.
On Friday the Reserve Bank of India (RBI) kept interest rates unchanged for a seventh straight policy meeting as growth is expected to remain robust while inflation stays above the 4% target.
Meanwhile, the benchmark Brent crude contract, hovering near $90 per barrel, concerned traders, as higher commodity prices could impact retail inflation.
Three Indian states aim to raise 65 billion rupees ($780.78 million) through the sale of bonds, while the central government will raise 300 billion rupees through bonds on Friday. ($1 = 83.2500 Indian rupees) (Reporting by Dharamraj Dhutia Editing by Eileen Soreng)
