Bond yields track oil, U.S. yields lower; inflation print in focus

FILE PHOTO: A cashier checks Indian rupee notes inside a room at a fuel station in Ahmedabad

By Dharamraj Dhutia

MUMBAI (Reuters) - Indian government bond yields traded lower for a fourth straight session on Thursday, tracking a further downward movement in oil prices as well as U.S. Treasury yields.

The downward move, however, was capped after the Indian rupee weakened following three sessions of gains and as cautious traders await crucial U.S. inflation print due later in the day.

The benchmark 10-year yield was trading at 7.3608%, as of 0430 GMT, after ending at 7.3870% on Wednesday. It has eased eight basis points in the previous three sessions.

"At the current levels, there is profit-booking and hence yields may remain in thin range, but underlying sentiment remains dovish, with inflation prints acting as key triggers," a trader with a state-run bank said.

Bond market participants said the benchmark bond yield needs to break its next crucial level of 7.35%-7.36% zone on the downside for sustained fall.

The U.S. consumer price index data is due later in the day, and is expected to provide more clarity on the Federal Reserve's interest rate trajectory. U.S. yields fell, with the 10-year yield easing below 4.10%.

Global oil prices were flat on Thursday after three sessions of decline on concerns that fresh COVID-19 curbs in China, the world's biggest crude importer, will impact fuel demand. The benchmark Brent crude contract was at $92.50 per barrel and has slipped more than 6% in three sessions.

Movement in crude oil prices could impact domestic inflation, as India is one of its largest importers. India's retail inflation data for October is likely to be released on Monday. The reading has remained above 6% since January, and accelerated to a five-month high of 7.41% in September.

India's retail inflation is likely to have slowed in October to 6.73% on weaker food price rises and a strong base year ago, but remained stubbornly well above the 6% upper limit of the Reserve Bank of India's tolerance band, according to the median view from a Nov. 2-9 Reuters poll of 47 economists.

(Reporting by Dharamraj Dhutia; Editing by Sherry Jacob-Phillips)