MUMBAI, May 6 (Reuters) - Indian government bond yields were lower on Monday, tracking a sharp decline in their U.S. peers after softer-than-expected jobs data and as the Indian government's surprise bond buyback announcement improved market sentiment.
The benchmark 10-year yield was at 7.1243% as of 11:00 a.m. IST, following its previous close of 7.1470%.
The shorter-tenor government bond yields declined in early trade after New Delhi said it would buy back securities worth 400 billion rupees ($4.79 billion).
"This would immediately release liquidity into the banking system, helping ease tightness seen in late April. The Reserve Bank of India might have anticipated that election-related constraints on government spending would further increase liquidity tightness," Citi said in a note.
U.S. Treasury yields tumbled to multi-week lows on Friday after the world's largest economy created fewer jobs than expected in April, reinforcing expectations that the Federal Reserve will start cutting interest rates later this year.
The 10-year U.S. yield was last at 4.4975% in Asian hours.
Data showed U.S. non-farm payrolls rose by 175,000 jobs in April, less than economists' projection of 243,000.
Following the report, U.S. rate futures priced in between one to two cuts of 25 basis points each for 2024, most likely starting in September or November, according to the LSEG's rate probability app.
For the last few weeks, the futures market had factored in just one cut due to persistently elevated inflation.
Meanwhile, oil prices edged up after Saudi Arabia hiked June crude prices for most regions and as the prospect of a Gaza ceasefire deal appeared slim.
Higher commodity prices are a major negative for India as they impact local retail inflation. ($1 = 83.4640 Indian rupees) (Reporting by Bhakti Tambe; Editing by Savio D'Souza)
