MUMBAI: Indian government bond yields were largely unchanged in the early session on Thursday, as traders await debt supply due on Friday and the US Federal Reserve policy decision due next week.

The 10-year benchmark 7.26% 2033 bond yield was at 7.1054% as of 10:00 a.m. IST, after closing at 7.1126% in the previous session.

“We may be in for a rangebound trading session with shallow volumes today, and any action could be around the debt auction tomorrow,” a trader with a primary dealership said.

New Delhi aims to raise 310 billion Indian rupees ($3.80 billion) through the sale of bonds on Friday, which includes the liquid 14-year bond that has been leading the gains in the last few days. The current rally in bonds began after stronger-than-expected demand at a similar debt auction last week.

Foreign banks and traders have been major bond buyers in the secondary market since then, on bets of a policy pivot by the Indian as well as US central bank soon. The 10-year US yield held around 3.40% levels, as market participants expect the Fed to pause after hiking rates next week.

The odds of a 25 basis-point rate hike by the Fed on May 3 have eased to below 80%, against above 90% last week, amid continued concerns about the regional banking sector and ahead of a possible vote on the US debt ceiling.

India bond yields seen easing tracking US peers

The Reserve Bank of India (RBI) maintained the status quo on its policy rate earlier this month, and easing inflation - India’s March retail inflation dropped to 5.66% and is set to ease below 5% in April - has cemented bets of a prolonged pause.

Easing oil prices could further aid sentiment, as India is one of the largest importers of the commodity and its pricing has a direct impact on local inflation.