* 10-year yield flat at 7.86 pct
* Repo bids rise to 632.95 bln rupees, the highest in 3
* Major Asian central banks keep rates on hold
By Subhadip Sircar
MUMBAI, March 7 (Reuters) - Indian government bond yields
ended flat on Thursday as traders shifted focus to key inflation
data due next week for cues on the central bank's policy
decision later this month.
A lower-than-expected headline reading and low core
inflation for February will cement expectations of a rate cut at
the Reserve Bank of India's March 19 review, the second such
rate cut in 2013.
Continued weakness in the economy and the government
sticking to its fiscal deficit targets have also helped in
firming up expectations of a rate cut.
A rate cut and a benign outlook on interest rate may provide
bond markets the trigger to rally after the high borrowing
numbers spelt out in the budget put a hold on a rally that began
in late December.
RBI is expected to be the only major central bank in the
region to cut rates this year even as Bank of Japan, Indonesia
and Malaysia kept rates on hold on Thursday.
"With an expected rate cut round the corner, introduction of
few more new benchmarks and clarity over withholding taxes, we
see the rally to remain in force up till April'13-end," said
Shakti Satapathy, a fixed income analyst with AK Capital.
The benchmark 10-year bond yield ended flat
at 7.86 percent.
It traded in a tight 7.85-7.87 percent band during the
session with trading volumes at average 236.75 billion rupees.
The cash deficit in the banking system showed some worsening
but still remained within the central bank's tolerance level.
The one-year OIS ended 2 basis points higher
at 7.58 percent, while the five-year OIS closed 1
basis point up at 7.21 percent.
(Editing by Subhranshu Sahu)