Indian federal bond yields jumped to a three-month high of 7.85 percent on Friday ahead of wholesale price data, with the market nervous the reading may be above 6 percent for the first time since April. Wholesale price inflation is forecast at an annual 5.96 percent in mid-March, potentially its highest in more than 10 months, and some traders said the risk was to the upside.
"When inflation comes it could move either way," said Anoop Verma, associate vice president at Development Credit Bank. "If it is 6.10 percent or something, there could be a little concern... Until they bring it down closer to (5 percent) there may not be any talk of cutting rates."
The 10-year bond yield stood at 7.85 percent, above Thursday's close of 7.78 percent and its highest since late December. The inflation data is due at about 12:00 pm (0630 GMT). The previous reading was 5.92 percent, a 10-month high. Friday is also the last day of the two-week reporting cycle for banks and Monday is the last day of the financial year, which traders said meant the market could be rangebound for a few days.