Bond market update: Government bond yields maintained a sideways trend on Wednesday, as a surge in the previous session attracted bargain hunters, despite lingering concerns over elevated Treasury yields.

The yield on the benchmark 10-year bond IN071833G=CC stood at 7.1100 per cent as of 10:00 am, slightly lower from its previous close of 7.1160 per cent, which marked its highest level in over two months.

"Around the benchmark yield of 7.10 per cent-7.11 per cent, there may be some consolidation, and we may not see any major spike for now," commented a trader affiliated with a state-run bank.

US bond yields continued their upward trajectory, fuelled by a streak of robust economic indicators, which has sparked worries about the timing and extent of rate adjustments by the Federal Reserve in 2024.

The 10-year US yield US10YT=RR surpassed the 4.40 per cent threshold for the first time in four months on Tuesday, hovering around 4.35 per cent during Asian trading hours.

Investor sentiment remained subdued due to the persistent surge in oil prices, which could directly impact local inflation. India, being one of the largest importers of crude oil, is particularly susceptible to such fluctuations.

The benchmark Brent crude contract traded near $89 per barrel, buoyed by a larger-than-expected decline in US crude inventories and escalating geopolitical tensions, which raised concerns about supply disruptions.

Attention now turns to the Reserve Bank of India's (RBI) first monetary policy decision of the financial year scheduled for Friday. Expectations lean towards a status quo, while insights on liquidity management and inflation control will be closely scrutinised.

The bond market sentiment has been influenced by the RBI's shift to multiple price-based auctions after almost three years.

On Friday, the government plans to raise Rs 38,000 crore through a bond auction to kickstart its borrowing programme for the new financial year that commenced on April 1. This includes Rs 20,000 crore allocated for a new 10-year bond.

(With Reuters inputs.)