The 10-year benchmark 7.26% 2033 bond yield was trading at 7.0494% as of 10:20 a.m. IST, after closing at
7.0445% on Tuesday.
Economists expect U.S. headline CPI to hold steady at an
annual 5% and core CPI to moderate very slightly to 5.5%. The
numbers, due at 1230 GMT, will show whether price pressures
continue to ease or remain at levels that could prompt the U.S.
Federal Reserve to hike interest rates further.
"Throughout the day, yields are likely to trade in a narrow range. There's U.S. CPI later today and government bond auction on Friday, so that could result in some movement in yields going ahead," a trader with a private bank said.
The Fed has hiked its interest rate by 25 basis points in its May meeting as widely expected, while hinting a pause in its monetary policy tightening cycle.
The next meeting of the U.S. central bank is in June and Fed
funds futures traders are pricing in an 83.8% odds of a pause,
while the rest sees likelihood of another 25 bps hike. The Fed fund rate currently stands at 5.00-5.25%.
Investors were also likely to avoid placing aggressive bets
ahead of local consumer inflation data, due on Friday.
India's inflation likely cooled to an 18-month low in April as rises in food and fuel prices moderated, keeping it below the Reserve Bank of India's (RBI) upper tolerance limit for the second consecutive month, according to Reuters poll.
The RBI surprised the market with a pause on rates in April when a 25-bps hike was largely expected. The repo rate currently is at 6.50%.
Market participants expect the benchmark bond yields to
trade in a range of 7%-7.10% this week.
(Reporting by Bhakti Tambe; Editing by Nivedita Bhattacharjee)
