MUMBAI, July 8 (Reuters) - Indian government bond yields edged lower in the early session on Monday, tracking a decline in their U.S. peers, after jobs data in the world's biggest economy boosted expectations that the Federal Reserve will begin to lower interest rates in September.
The benchmark 10-year yield was at 6.9854% as of 10:20 a.m. IST, following its previous close at 6.9926%.
"Amid the lack of any directional local cues, government bond yields will continue to track global cues like U.S. yields and oil prices," a trader with a private bank said.
U.S. yields declined on Friday after data showed nonfarm payrolls grew by a slightly higher-than-expected 206,000 jobs in June, but the count for April and May was revised lower by 111,000, suggesting the trend in payrolls growth was slowing.
The labour market has been a key focus for Fed policymakers in their debate over when to begin cutting rates as they fear a resilient job market could reignite inflation.
The 10-year U.S. yield fell 7 basis points (bps) on Friday and was last at 4.2920% in Asian hours.
The odds of a 25-bps rate cut in September jumped to roughly 73% chance from 58% a week ago, according to CME Group's FedWatch tool.
Both India and the U.S. will report consumer inflation data this week, which will provide further cues for the market.
Investors will also await Fed Chair Jerome Powell's semi-annual monetary policy testimony to U.S. lawmakers on Tuesday and Wednesday.
Back home, the newly elected Indian government will present its first union budget on July 23, which will be the next key trigger for the bonds market.
Indian Prime Minister Narendra Modi's government has no plans to increase its fiscal deficit target despite speculation that more spending might be needed to appease coalition partners, a government official told Reuters in June.
(Reporting by Bhakti Tambe; Editing by Nivedita Bhattacharjee)
