INDIA BONDS-Indian bond yields seen little changed after three-session fall

By Dharamraj Dhutia

MUMBAI, Jan 23 (Reuters) - Indian government bond yields are expected to trend largely unchanged in early deals on Thursday and consolidate around current levels, after the benchmark bond yield declined for three consecutive sessions.

The 10-year bond yield IN067934G=CC is likely to move between 6.70% and 6.75%, a trader with a private bank said, compared with the previous close of 6.7228%.

"Benchmark bond yield is at a level that should see some consolidation, as room for further fall is very limited, especially ahead of multiple market-moving events lined up over the next few days," the trader said.

Bond yields have been easing, with the benchmark bond yield down 5 basis points over the last three sessions, as U.S. Treasury yields have largely stabilised after President Donald Trump was not seen very aggressive on tariff imposition.

Still, market participants do not anticipate the benchmark bond yield to ease below 6.70%, especially ahead of this paper's supply on Friday.

New Delhi will raise 320 billion rupees ($3.70 billion)through sale of bonds on Friday, which includes 220 billion rupees of the benchmark bond.

Trump has vowed to hit the European Union with tariffs and said his administration was discussing a 10% punitive duty on Chinese imports. He had earlier said Mexico and Canada could face levies of around 25% by Feb. 1.

The 10-year U.S. yield rose marginally, but remain stuck around 4.60% mark in Asia hours on Thursday.

Traders expect Trump's proposed tariff policies will remain a key focus area as these may add to inflation, reducing the possibility of interest rate cuts from the Federal Reserve.

U.S. rate futures have now priced in around 38 basis points of interest rate cuts in 2025.

Back home, spotlight will remain on the Reserve Bank of India's next set of actions on infusion of durable liquidity into the banking system in coming days.

The central bank has been conducting daily repos, but has been able to lower just the overnight rates, while liquidity deficit has jumped to a one-year high.

KEY INDICATORS:

Brent crude futures LCOc1 were 0.25% lower at $78.80 per barrel, after easing 0.4% in the previous session

Ten-year U.S. Treasury yield US10YT=RR at 4.6048%; two-year yield US2YT=RR at 4.2932%

RBI to conduct 1-day variable rate repo auction for 1.25 trillion rupees

India to buy back government securities worth up to 200 billion rupees

($1 = 86.4980 Indian rupees)