MUMBAI, Oct 5 (Reuters) - Indian government bond yields eased in early trading on Thursday following a long-awaited dip in U.S. yields, lifting sentiment ahead of the Reserve Bank of India's monetary policy decision due on Friday.
The 10-year benchmark 7.18% 2033 bond yield was at 7.2108% as of 10:00 a.m. IST, after ending at 7.2367% in the previous session.
"With the threat of a further spike in Treasury yields out for now, focus will purely remain on the RBI policy decision and guidance," a trader with a private bank said.
U.S. yields eased finally after data showed jobs growth was below economists' expectations in September. Private payrolls increased far less than expected in September, with 89,000 jobs added, the ADP National Employment Report showed on Wednesday.
The 10-year U.S. yield hit an over 16-year high of 4.88% on Wednesday, following a persistent rise on bets of higher-for-longer interest rates.
A drop in oil prices further helped the bond bulls worried about a break of a crucial technical upside level for the benchmark paper.
The benchmark Brent crude eased by over $5 per barrel on Wednesday and is hovering around $85, sharply lower than the more than $97.50 a barrel hit last week.
Meanwhile, the Reserve Bank of India will announce its monetary policy decision on Friday, when the central bank is expected to pause, with focus remaining on the inflation trajectory. All but one of the 71 economists surveyed by Reuters in late September expect the RBI to keep the key repo rate unchanged.
"The policy will see the RBI reiterating caution, amid a fluid global narrative as markets reprice higher-for-longer (narrative)," said Madhavi Arora, an economist at Emkay Global Financial Services. (Reporting by Dharamraj Dhutia; Editing by Dhanya Ann Thoppil)
