MUMBAI, May 15 (Reuters) - India's benchmark government bond yield slipped to a six-week low in early trading on Wednesday tracking a decline in U.S. Treasury yields, as markets awaited the U.S. consumer price inflation report.
The benchmark 10-year yield was at 7.0926% as of 10:00 a.m. IST, following its previous close of 7.1067%. Earlier in the day, it fell to 7.0851%, the lowest since April 2.
"Bulls are having a strong grip for now, but if buying does not sustain through the session, we could see benchmark ending closer to round 7.10%, as state-run banks are continuously on offers," a trader with a primary dealership said.
State-run banks have sold nearly $1 billion of government bonds so far this month, after remaining the largest buyers in the first month of the financial year.
U.S. yields fell overnight and stayed lower in Asia hours on Wednesday, aided by Federal Reserve Chair Jerome Powell saying he expects inflation will fall in coming months.
The 10-year yield was below 4.45%, close to a five-week low, while bets of a 25 basis point rate cut in September rose to 65% from 61% a day before.
The U.S. CPI is due after Indian market hours and economists polled by Reuters expect the closely-watched core inflation to rise by 0.3% in April, down from 0.4% in March, for an annual gain of 3.6%, down from 3.8%.
Traders also await the response to the Indian government's second bond buyback in two weeks.
This would be followed by a fresh debt auction worth 310 billion rupees ($3.71 billion), which includes 200 billion rupees of the upcoming benchmark 7.10% 2034 bond.
The central bank will sell Treasury bills worth 270 billion rupees later in the day. ($1 = 83.4820 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Varun H K)
