India's 10-year bond yield drops on report of rate pause after Friday's decision

FILE PHOTO: People stand outside the Bombay Stock Exchange (BSE), after Sensex surpassed the 60,000 level for the first time, in Mumbai

MUMBAI (Reuters) - Indian government bond yields dropped on Thursday, with the 10-year benchmark yield down nine basis points after a media report quoting unnamed banking sources said the Reserve Bank of India (RBI) might pause and be guided by data after Friday's policy decision.

The media report did not identify the banking sources.

India's 10-year benchmark bond yield was at 7.1665%, as of 0918 GMT. The yield had dropped to 7.1539% earlier in the day after ending at 7.2416% on Wednesday, snapping a nine-day losing streak.

"The market is reacting to unconfirmed reports about pause in rate hike cycle, but I think the bulk of the reaction is already done, and yield should see support at around 7.15% levels for now," a trader with a state-run bank said.

The RBI's monetary policy decision is due on Friday and market participants remain divided over the quantum of rate hike, with views widely split between 25 basis points and 50 basis points, according to a Reuters poll of economists.

The RBI has raised the repo rate by 90 basis points to 4.90% since embarking on a tightening cycle at an unscheduled policy meeting in May, to curb inflationary pressures.

(Reporting by Dharamraj Lalit Dhutia; editing by Uttaresh.V)