Indian bond yields at 7-year high before inflation

(Updates to early trade)

MUMBAI, July 4 (Reuters) - Indian federal bond yields surged to fresh seven-highs on Friday after newspapers said annual inflation would have topped 11.6 percent on June 21, higher than market expectations for 11.44 percent.

Dealers said an expected squeeze in cash availability due to a 100 billion rupees ($2.3 billion) bond auction and increase in banks' reserve requirement also hurt sentiment.

At 10:20 a.m. (0450 GMT), the yield on the 10-year bond <IN082418G=CC> was at 8.90 percent, its highest since late October 2001. It ended at 8.81 percent on Thursday.

"With oil prices hitting record highs everyday, there is little hope of inflation softening anytime soon," a dealer with a private sector bank said.

The dealer also said 10-year yield could touch 9.10 percent in the near term.

U.S. oil CLc1 was trading above $145 a barrel, after hitting an all-time high of 145.85 on Thursday.

Oil is India's biggest import and dealers said high global prices could prompt the government to raise state-set prices of petrol, diesel, kerosene and cooking gas.

Petroleum Secretary M.S. Srinivasan said on Thursday the government was expected to review domestic fuel pricing in October.