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MUMBAI: Indian government bond yields are expected to remain largely unchanged in the early session on Monday, ahead of the May domestic inflation data later in the day, which will provide further cues.

The 10-year benchmark 7.26% 2033 bond yield is expected to be in the 7.00%-7.04% range, after closing at 7.0356% in the previous session, a trader with a primary dealership said.

“There is likely to be some steepening in the 2 year-10 year segment of the curve as rate cuts get pushed out and bond supply gets heavier on a net basis next quarter,” said Puneet Pal, fixed income head at PGIM India Mutual Fund.

The 10-year benchmark yield posted its biggest weekly jump after the Reserve Bank of India’s (RBI) monetary policy guidance on inflation hurt sentiment last week.

RBI Governor Shaktikanta Das said it needed to move towards the primary target of inflation at 4%, and that it would do “whatever is necessary to ensure that long-term inflation expectations remain firmly anchored.”

Consumer price inflation in India likely cooled to a 20-month low in May to 4.42% as food price rises slowed further, a Reuters poll of economists found.

The central bank expects inflation to average 5.1% in this financial year.

Analysts, however, do not see inflation easing sustainably to 4% near term. Market also awaits US inflation print on Tuesday, followed by the crucial Fed policy decision.

The odds of a pause by the US central bank currently stand at 73%.

“India cannot cut rates until the global rate cycle has pivoted, the certainty of which can come only towards the end of the year,” Pal added.

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