MUMBAI, Feb 9 (Reuters) - Indian government bond yields were largely unchanged on Friday after an initial uptick in opening trades, as the market awaited a fresh supply of debt via the weekly auction.
The fresh supply comes a day after the central bank's monetary policy decision disappointed markets as it lacked any dovish commentary.
India's benchmark 10-year yield was at 7.0808% as of 10:00 a.m. IST, following its previous close of 7.0789%.
"There was an initial pressure, but broadly demand-supply dynamics are looking favourable in the near term, and as the auction cycle is nearing its end, benchmark yield is unable to break the 7.08%-7.10% zone on the upside," a trader with a primary dealership said.
New Delhi aims to raise 330 billion rupees ($3.98 billion), including 160 billion rupees of the benchmark paper, in its penultimate debt auction for the current financial year.
The debt supply comes a day after the Reserve Bank of India, in its last monetary policy decision for this fiscal, kept rates and stance unchanged without providing major dovish guidance, while reiterating its commitment to meet the inflation target.
"The last mile of disinflation is always the most challenging and that has to be kept in mind," RBI Governor Shaktikanta Das said.
The central bank estimated retail inflation at 5.4% in 2023-24, unchanged from its previous projection, and expected it to ease to 4.5% in the next financial year, assuming normal rains.
"The inflation projection of next year may be conservative and we may see some change in stance post July-September next year. The RBI will consider easing liquidity first and then will resort to cutting rates if required," said Alok Singh, group head of treasury at CSB Bank.
Meanwhile, U.S. yields remain elevated with the 10-year yield around the 4.15% mark, ahead of key inflation data due next week, which may give further clues on when the Federal Reserve is likely to begin cutting rates.
The odds of a Fed rate cut in May have declined to around 62% from 94% last week. ($1 = 82.9825 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman )
