INDIA BONDS-Bond yields steady as wait for fresh cues continues

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MUMBAI, Jan 5 (Reuters) – Indian government bond yields were unchanged in early trade on Thursday as the market awaited new triggers in the form of further movement in oil prices and the debt supply on Friday.

The benchmark 10-year yield was trading at 7.3190% as of 10:00 am IST, after ending at 7.3212% on Wednesday.

The market needs a very strong positive trigger to break the 7.30% level below that for the reference paper, said a trader with a state-run bank.

New Delhi aims to raise 280 billion rupees ($3.38 billion) through the sale of bonds, which includes 120 billion rupees of the reference paper, on Friday.

Most market participants expect the benchmark bond yield to trade in a narrow range of 7.30%-7.40% for most of this month ahead of the budget of the Union.

Apart from the budget announcement, bond yields can react to retail inflation data and changes in oil prices.

Oil prices fell further on Wednesday, with the benchmark Brent crude contract posting its biggest one-day drop in four months. Investors are concerned about fuel demand as the global economy slows and COVID infections spread in China.

The benchmark contract fell 5.2% on Wednesday after falling 4.4% on Tuesday, posting the steepest percentage loss in the first two trading days of any year for more from three decades.

India is one of the largest importers of commodities and oil prices have a direct impact on retail inflation. Data for December is due next week and comes after the reading fell below 6% in November, the first in 11 months.

The Reserve Bank of India is mandated to keep inflation around 4%, with a tolerance level of 200 basis points (bps) on either side. The central bank raised the repo rate by 225 bps in 2022 to 6.25% in its fight against inflation. ($1 = 82.7520 Indian rupees) (Reporting by Dharamraj Dhutia Editing by Sohini Goswami)

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