MUMBAI: Indian government bond yields are likely to open lower in early trade on Wednesday, tracking US peers, after inflation in the world’s largest economy came in line with forecasts ahead of the Federal Reserve’s policy decision.

The 10-year benchmark bond yield is expected to open between 7.26% and 7.30%, after ending the previous session at 7.2745%, a trader with a primary dealership said.

US Treasury yields fell on Tuesday after inflation data reinforced views the Fed will hold rates steady after its two-day policy meeting ending on Wednesday in US trading hours.

The US core consumer price index increased 0.3% in November after climbing 0.2% in the prior month, meeting economists’ expectations.

“In the upcoming policy, Fed is likely to continue to sound hawkish and point caution that last mile is still some time away,” said Anitha Rangan, an economist at Equirus Group.

Furthermore, easing of financial conditions, such as lower bond yields, may be interpreted as easing market conditions and Fed could throw additional caution here, she added.

Meanwhile, India’s retail inflation in November rose at its fastest pace in three months due to higher food prices. Annual retail inflation rose to 5.55% in November from 4.87% in the previous month.

India bond yields dip; inflation prints, Fed decision remain key trigger

However, this was below that rate of 5.70% forecast by a Reuters poll. “The positive in the data was the core CPI, which came in lower at 4.1%, as against market expectations of 4.3%,” said Deepak Agrawal, chief investment officer - debt at Kotak Mutual Fund.

Oil prices fell more than 3% on Tuesday to their lowest level in six months on concerns of oversupply and after US economic data showed an unexpected rise in consumer prices.