MUMBAI: Indian government bond yields are likely to rise in early session on Friday as their US peers and oil prices continued to surge, dampening investor sentiment.

The 10-year benchmark 7.18% 2033 bond yield is expected to be in the 7.38%-7.43% range after ending at 7.3720% in the previous session, a trader with a private bank said.

“The benchmark yield may hit the 7.40% mark but if it breaks that level, the next resistance zone is 7.43%-7.45%,” the trader said.

US Treasury yields surged again on Thursday as the Federal Reserve Chair Jerome Powell said signs of above-trend growth could warrant more monetary tightening.

“The US 10-year (yield) inching towards the 5% target suggests that markets are slowly but surely bracing for the impact of ‘higher for longer’ (interest rates),” said Anitha Rangan, an economist at Equirus Group.

India bond yields rise tracking spike in oil prices, US peers

Meanwhile, oil prices extended gains on fears that the Israel-Gaza conflict may spread in the Middle East and disrupt supplies.

As long as external risks such as tensions in the Middle East and higher crude oil prices remain at the forefront, the Reserve Bank of India (RBI) will also have to toe the global theme, Rangan added.

The RBI, in its October bulletin, said the current account deficit is modest and more than financed by the foreign exchange reserves providing a strong buffer, insulating the economy from global spillovers and a slowdown in external demand.