MUMBAI: Indian government bond yields turned lower on Thursday after a brief upmove, as traders shifted focus to falling oil prices that could offer some respite to domestic inflation outlook.

Bond yields had risen earlier in the session on the back of firm US Treasury yields, with the 10-year note above 3.20%. The benchmark 10-year Indian government bond yield was at 7.1810% as of 0505 GMT.

The yield fell six basis points on Tuesday to end at 7.1893%.

The yield had fallen 13 bps last month, after a similar easing in July.

The new 10-year 7.26% 2032 bond yield was at 7.1714%, after ending at 7.1757% on Tuesday.

“Since the 10-year yield was not able to break the 7.20%-7.21% handle, bulls are back in the market as fall in oil has outweighed the rise in US yields,” a trader with a private bank said.

The benchmark Brent crude contract has come off by nearly $10 per barrel in last three trading sessions to $95 per barrel, led by increased supply and worries that the global economy could slow further.

India bond yields rise, tracking moves in US Treasuries

India is a major importer of crude oil and falling prices will ease domestic inflation, which has stubbornly stayed above 6% for seven straight months.

Meanwhile, market participants do not expect softer growth reading to alter the Reserve Bank of India’s rate hike trajectory. India’s economy grew 13.5% in the April-to-June quarter, though the reading was below a 15.2% forecast by economists in a Reuters poll.

“The Q2 GDP data release should not be a game-changer for monetary policy,” Nomura said in a note.

“We reaffirm our view of a 35bp repo rate hike in September and a final 25bp hike in December, with a 6% terminal repo rate.”

The RBI had raised repo rate by 50 basis points in August to 5.40%, which took its aggregate hikes to 140 bps in May-August. The next policy decision is due on Sep. 30.