MUMBAI, April 26 (Reuters) - Indian government bond yields rose in early trade on Friday as U.S. yields spiked to new highs amid a further push back in rate cut expectations, while focus was also on fresh domestic debt supply.
The benchmark 10-year Indian yield was at 7.2203% as of 10:00 a.m. IST, following its previous close at 7.2061%.
New Delhi will sell bonds worth 320 billion rupees ($3.84 billion) later in the day, which includes 200 billion rupees of the 7.10% 2034 paper that will replace the existing benchmark bond soon.
"As expected, there is position cutting, with benchmark nearing the crucial resistance level of 7.25%, but the next action would now happen only after the debt sale and investor demand," a trader with a state-run bank said.
U.S. yields jumped overnight, with the 10-year yield hitting its highest level in nearly six months, and is threatening to break the critical 4.75% mark on the upside.
The two-year yield, a closer indicator of interest rate expectations, rose over the 5% mark again.
Even as U.S. growth was lower than expected, a key inflation gauge rose by 3.7%, above expectations for a 3.4% increase. Traders will now keep a watch for the highly anticipated personal consumption expenditures report for March, due later in the day.
The data, along with hotter-than-expected retail inflation reading for March, could nudge the U.S. Federal Reserve to adopt a cautious tone in its monetary policy decision on May 1, traders said.
Odds of U.S. rate cuts have declined further, as investors are now pricing in the possibility of around 35 basis points (bps) of cuts by the Fed by the end of 2024, according to CME's FedWatch Tool. ($1 = 83.3150 Indian rupees) (Reporting by Dharamraj Dhutia Editing by Eileen Soreng)
