MUMBAI: Indian government bond yields fell in early trading on Wednesday, as a plunge in oil prices boosted investor appetite, which has improved following a recent plunge in US Treasury yields.

The 10-year benchmark bond yield was at 7.2646% as of 10:00 a.m. IST, after ending the previous session at 7.2813%.

“Bond yields had already reversed direction after Treasury buying, and with oil also easing to comfortable levels, the negativity has been erased, at least for the near term,” a trader with a private bank said.

Oil prices declined after industry data showed a steep build up in US crude supplies.

India bond yields seen lower, tracking fall in US peers

The US Energy Information Administration expects total petroleum consumption in the country to fall by 300,000 barrels per day (bpd) this year, reversing its earlier forecast of a 100,000 bpd increase.

The benchmark Brent crude contract dropped over 4% on Tuesday, and hit a low of $81.26 per barrel in Asian hours on Wednesday, which is its lowest level since July 24.

Easing oil prices will help India, which is a major importer of the commodity, to fight inflation.

The Reserve Bank of India (RBI) is focussed on lowering inflation to its 4% target. India’s retail inflation for October is due on Nov. 13.

Barclays expects a reading of 4.60%, down from 5.02% in September. Meanwhile, the 10-year US yield continues to stay below the 4.60% mark, as traders do not expect the Federal Reserve to hike rates further.

Market participants continue to await cues on debt sales from the RBI.

Traders last week raised concerns over declining activity in the bond market.

New Delhi will sell bonds worth 390 billion rupees ($4.69 billion) on Friday. It will also sell Treasury bills worth 240 billion rupees on Wednesday.