MUMBAI, Aug 12 (Reuters) - Indian government bond yields ended higher on Friday, after easing for last two trading sessions, tracking a similar move in U.S. Treasuries, while investors await domestic retail inflation data.

The 10-year benchmark bond yield ended at 7.2894%, after closing at 7.2673% on Thursday. It had fallen eight basis points in the last two sessions. For the week, the yield was down one basis point. Indian money markets will remain shut on Monday and Tuesday for local holidays.

"Bonds traded in a single direction tracking U.S. yields, but volume was shallow, ahead of long weekend and inflation data," said a trader with a private bank.

India's latest retail inflation reading is likely to have eased, potentially mirroring data that showed softer-than-expected price increases in the United States. A Reuters poll showed India's July inflation may drop to 6.78% from 7.01% in the prior month.

"July CPI inflation is likely to ease on lower staple food and lagged impact of fuel excise cuts as well as correction in imported costs," Radhika Rao, India economist at DBS said.

Stubborn inflation continues to remain a major concern for the Reserve Bank of India, despite the central bank having lifted its key policy rate by 140 basis points since May.

"The RBI is preferring to maintain a cautious stance, highlighting it was premature to go easy on the inflation fight," DBS' Rao said. Markets have, meanwhile, pared down their aggressive rate hike bets,she added.

Additionally, the federal government is likely to issue a new 10-year bond, hoping to draw strong investor demand and realign the entire yield curve as soon as next week, analysts said.

"The new 10-year is expected to be priced between 7-10 basis points lower than the current benchmark levels and the entire yield curve may be lowered by few basis points initially post new bond auction," said Venkatakrishnan Srinivasan, founder and managing partner at debt advisory firm Rockfort Fincap.

Bond yields rose tracking similar move in U.S. peers, with the 10-year U.S. yield climbing 10 basis points on Thursday, as investors bet the Federal Reserve will continue hiking rates with inflation remaining high, even though price pressures eased last month.

Global oil prices also gained, with the benchmark Brent crude oil contract inching closer toward $100 per barrel as the International Energy Agency raised its demand forecast for this year. (Reporting by Dharamraj Lalit Dhutia Editing by Dhanya Ann Thoppil)