MUMBAI, July 15 (Reuters) - Indian government bond yields were marginally higher in the early session on Monday after stronger-than-expected local inflation data suggested policy easing could longer.
The benchmark 10-year yield was at 6.9942% as of 10:00 a.m. IST, compared with its previous close at 6.9882%.
"Market is reacting a bit to the inflation data, which has dampened chances of any near-term easing. Still, it could be transient in nature. Hence, we are not seeing any major position unwinding," a trader with a private bank said.
India's retail inflation, accelerated for the first time in five months in June, with the reading at 5.08%, up from 4.80% in May and a similar reading forecast in a Reuters poll.
The move was driven by a sharp jump in food prices that account for nearly half of the retail inflation. Core inflation, which strips out volatile food and energy prices, was estimated between 3.08% and 3.14%, according to three economists. The government does not release core inflation data.
Barclays expects the July inflation reading at 3%, driven lower in part by a high base. Food prices are likely to increase into next month, though the momentum in vegetable prices would ease.
"We see a window for rate cuts opening only in December 2024. We highlight the risk of further delay if growth remains on a strong footing or if the inflation surge is higher than expected," economist Shreya Sodhani said in a note.
Meanwhile, U.S. yields were marginally lower in Asian hours on Monday as economic data bolstered expectations that the Federal Reserve was likely to cut interest rates in September.
The market did not react much to Republican presidential candidate Donald Trump surviving an assassination attempt over the weekend.
The probability of the Fed cutting rates by 25 basis points in September has remained close to 93%, according to the CME FedWatch Tool. (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
