MUMBAI: Indian government bond yields trended lower in early trade on Wednesday, tracking a further decline in US yields after dovish comments from a Federal Reserve official hinted at interest rate cuts.

The 10-year benchmark bond yield was at 7.2442% as of 10:00 a.m. IST, after ending the previous session at 7.2770%.

“The small gap down opening in yields is factoring the large move in Treasuries, but for yields to drop further, we need any other stronger trigger,” trader with a state-run bank said.

US yields declined on Tuesday and extended their fall in Asian hours on Wednesday, with the 10-year yield slipping to 4.28%, a level last seen in mid-September.

Fed Governor Christopher Waller said on Tuesday that inflation was moving along expected lines and he was confident that policy was well-positioned to get inflation back to 2%.

If the decline in inflation continues for several more months, the Fed could start lowering the policy rate, he said.

Softening US economic data, including the inflation reading two weeks ago, has fuelled expectations that the Fed will not hike rates further, with a more than 40% probability of a cut in March and an over 70% chance of a cut in May.

India bond yields dip as 10-year US yield back at 4.40%

Back home, traders continue to await fresh domestic cues, including July-September economic growth data, due on Thursday.

A Reuters poll predicts gross domestic product (GDP) growth to have slowed to 6.8% from 7.8% in the previous quarter.

Growth is forecast to average 6.4% this fiscal year and 6.3% in the following year, driven partly by higher government capital expenditure, according to the wider Reuters poll.

The fall in domestic bond yields on Wednesday was capped as traders await a decision regarding the inclusion of Indian bonds in the Bloomberg Global Aggregate index after JPMorgan added the notes to its emerging market index in September.