Indian bond yields may ease to fresh 2-1/2-month lows on Monday as Friday's gains in US Treasuries cement expectations the Federal Reserve will not raise rates on the back of a slew of economic data.
The Fed, which paused its two-year rate tightening campaign on August 8, meets again later this month to review rates. This could influence India's rates as the central bank has repeatedly said global factors increasingly weighed more in its policy formulation.
But fresh issues and concerns that cash with banks could get squeezed due to advance tax outflows will check the fall. The government plans to raise 60 billion rupees by auctioning 7.59 percent 2016 bond and a 7.50 percent 2034 bond for 30 billion rupees on September 8.
Indian central bank governor YV Reddy said on Saturday he expected the government's borrowing programme to remain in budget.
The yield on the Indian benchmark 10-year bond ended unchanged on Friday at 7.88 percent. It had hit a 10-week intraday low of 7.85 percent on Thursday.