MUMBAI: Indian government bond yields may inch up on Wednesday, tracking a slight uptick in US rates ahead of key inflation data and expectations of limited downside for local yields from current levels.

The benchmark 10-year bond yield is likely to move between 6.8150% and 6.85% through Wednesday’s session, according to a fixed income trader at a bank.

The yield had dipped at open to 6.8074% on Tuesday following which sellers kicked in to take it higher to 6.8265% at close.

It is “quite evident” that there is little appetite to push the yield below 6.80% right now, the trader said.

“The bias today is on the higher side (for yields). Not by much though, about 1-2 basis points.”

The rally in US Treasuries fuelled by Donald Trump’s pick of treasury secretary wore out. US yields nudged up on Tuesday and were slightly higher in Asian hours.

Investor focus is now on US October core PCE data, the Federal Reserve’s preferred inflation gauge, due later in the day.

The data comes amid uncertainty on whether the US central bank will cut rates at next month’s policy meeting.

Currently, it is nearly 50-50 on whether the US central bank will cut or be on hold, per the swap market. Economists polled by Reuters expect October core PCE to rise 0.3% month-on-month.

“We need the month-on-month to average 0.17% over time to bring the annual rate down to 2% (the Fed’s medium-term target), so a 0.3% outcome is too hot for the Fed to be completely comfortable with the inflation story,” ING Bank said in a note.

India bond yields to trend higher as US peers spike

Meanwhile, minutes of the Nov. 6-7 Fed meeting, which were released on Tuesday, showed policymakers appeared divided over how much further they may need to cut interest rates, though many said it was appropriate to reduce policy restraint gradually.