(Reuters) - Indian government bond yields ended largely unchanged on Wednesday amid consolidation ahead of inflation readings for India and the United States, to gauge further moves by central banks in both countries.
December retail inflation reports for both India and the U.S. are due on Thursday.
The benchmark 10-year yield ended at 7.2913%, after ending at 7.3133% on Tuesday.
It has fallen for the last three consecutive sessions, easing by about eight basis points (bps) during this period, tracking a slump in U.S. yields.
"Bond yields will trade in a flattish trend till the inflation data," said Anuj Bhala, head of rates trading at SBM Bank (India). "Federal budget will act as a major directional trigger."
The U.S. reading comes after weak economic data has raised bets of a slowdown in rate hikes from the Federal Reserve. The Fed has raised interest rates by 425 bps in 2022 and is set to take the same above 5% in 2023.
India's retail inflation for December is likely to remain steady at 5.90%, after easing to 5.88% in November, a Reuters poll of economists showed.
The Reserve Bank of India is mandated to keep inflation within the 2%-6% band and has raised the repo rate by 225 bps in 2022 to 6.25%.
The RBI may opt for a 25 bps rate hike in February followed by a prolonged pause, according to market participants.
Apart from inflation, market participants will remain focussed on the Union budget announcement due on Feb. 1, when traders will assess the government's fiscal consolidation path and borrowing for the next financial year.
While DBS expects the government to announce gross borrowing of 15.50 trillion rupees, with a fiscal deficit aim of 5.9%, Goldman Sachs has pegged the gross borrowing at 16.80 trillion rupees.
India aims to raise 14.21 trillion rupees in the current financial year through sale of bonds.