* 10-year bond yield ends 2 bps lower at 7.92 pct
* 10-yr yld may fall to 7.80-7.85 pct if CPI eases sharply-trader
* Absence of weekly debt sale aids sentiment
By Neha Dasgupta
MUMBAI, Dec 8 (Reuters) - India’s benchmark 10-year bond yield fell to a 16-1/2 month low as a slump in global oil prices reinforced expectations the central bank could cut interest rates by early next year.
Traders also drew comfort from the absence of a weekly debt sale, as is usually the case on Friday.
They expect underlying sentiment for bonds to remain strong, though further gains would be held off until the November data for retail inflation comes out on Friday.
“If CPI inflation data is extremely good, we should at least see 7.80-7.85 percent on the 10-year bond yield. And from there, we may see some correction,” said Debendra Kumar Dash, a fixed income dealer with DCB Bank.
The benchmark 10-year bond yield ended down 2 basis points at 7.92 percent after touching 7.91 percent in intra-day trade, its lowest level since July 15, 2013.
Brent crude oil prices were near five-year lows on predictions that oversupply would keep building until next year after OPEC decided not to cut output.
That helped offset the impact of higher U.S. Treasury yields after surprisingly strong U.S. November jobs data raised expectations the Federal Reserve might consider raising interest rates by mid-2015.
In the overnight indexed swap market, the benchmark 5-year rate ended up 2 basis points at 7.15 percent, while the 1-year rate ended unchanged at 7.78 percent. (Editing by Prateek Chatterjee)