MUMBAI, Jan 19 (Reuters) - Indian government bond yields fell in early trading on Thursday, tracking a similar move in U.S. notes as weak economic data in the world's largest economy prompted policy-pivot bets.
The benchmark 10-year yield was at 7.2909% as of 10:00 a.m. IST after closing lower at 7.3243% on Wednesday.
"We could have seen a sharper move today had it not been for elevated borrowing fears for the next financial year," a trader with a state-run bank said.
India's gross borrowing is expected to hit a record 16.80 trillion rupees ($206.72 billion) aiming for a fiscal deficit of 5.8% of gross domestic product, Ashish Agrawal, head of FX and EM macro strategy research, Asia, Barclays, told Reuters.
U.S. yields dropped after data showed that U.S. retail sales fell more than expected in December and as the Bank of Japan maintained its bond notes cap, reducing concerns of investors switching to Japanese bonds.
The 10-year US yield eased to its lowest level in four months and was at 3.37%.
Fed funds futures are now expecting the benchmark rate to top out at 4.87% in June, down from 4.90% ahead of Wednesday's data, with rates likely to fall to 4.34% in December.
Traders in India are waiting for the Union budget to be tabled on Feb. 1, with focus on the government's fiscal consolidation path and its borrowing calendar for the next financial year.
Meanwhile, oil prices eased further breaking its recent rising streak as data showed a large unexpected increase in U.S. crude stocks for a second week, heightening concerns of a drop in fuel demand.
The benchmark Brent crude futures were 1.2% at $84 per barrel, after easing 1.1% in previous session. ($1 = 81.2700 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)
