MUMBAI, June 28 (Reuters) - Indian government bond yields were flattish in early trades on Friday, as market participants expected inflows on the first day of Indian debt's addition to the widely-tracked JPMorgan emerging market index.
The benchmark 10-year yield was at 6.9984% as of 10:00 a.m. IST, following its previous close of 6.9992%.
"As of now, we have not seen any major chunk of flows moving in bonds, but as soon as the market sees something on those lines, we could see a rally in bond prices," traders with a private bank said.
Most Indian government bonds under the Fully Accessible Route (FAR) will be a part of the JPMorgan index. These papers have already seen inflows nearing $11 billion since the inclusion's announcement last September.
Market participants pointed to some foreign inflows from passive investors on Thursday, with data showing foreign investors buying around 10 billion rupees of notes.
Still, a larger chunk is expected on Friday, with investors picking up more longer-duration papers, a continuation of a trend from the last few weeks.
However, JPMorgan strategists said 32%-40% of the expected $20-25 billion of flows have already played out, while Morgan Stanley said investors have allocated 3.6% of holdings to the country's bonds as of the end of May.
Traders are also expected to remain focused on debt auction, as New Delhi will sell bonds worth 310 billion rupees ($3.72 billion), which includes 200 billion rupees of the benchmark paper, later in the day.
Meanwhile, the 10-year U.S. yield was above 4.30%, with investors awaiting a key inflation gauge - due after Indian market hours later in the day. ($1 = 83.4100 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman )
