MUMBAI, Jan 8 (Reuters) - Indian government bond yields eased in early trades on Monday, as market participants took comfort from a fall in oil prices, even as they continued to monitor U.S. Treasury yields for further cues.
India's 10-year benchmark bond yield was at 7.2151% as of 10:15 a.m. IST, against its previous close at 7.2348%.
Oil prices fell by more than 1% on Monday on sharp price cuts by top exporter Saudi Arabia and a rise in OPEC output. The benchmark Brent crude was trading 1.1% lower at $77.86 a barrel in Asian hours.
Meanwhile, U.S. Treasury yields rose on Friday, with the 10-year yield above the key 4% mark, as persistent strength in the labour market sparked concerns over inflation and the extent of Federal Reserve's rate cuts.
Futures markets are pricing in a 44% chance the Fed keeps benchmark rates at their current range of 5.25% to 5.5% at its March meeting, up from 11.5% a week ago, according to CME's FedWatch Tool.
Overall, markets see the Fed cutting rates by a total of 132 basis points by the end of the year, down from expectations of more than 160 basis points in cuts two weeks ago.
Traders await inflation prints due in India and U.S. later this week.
India's headline retail inflation is expected to rise 5.6% on-year in December from 5.55% in November, according to Barclays.
The Reserve Bank of India (RBI) should not be "overly worried" about food inflation at this point as there is no sign of second round inflationary impact of high food prices on inflation expectations, Pankaj Pathak, a fixed income fund manager at Quantum Asset Management, said.
"If at all, the RBI needs to cut rates in 2024, that would probably come in response to financial or economic shock from the external world," Pathak added. (Reporting by Bhakti Tambe; Editing by Mrigank Dhaniwala)
