MUMBAI, March 6 (Reuters) - Indian government bond

yields are expected to edge lower in the early session on

Wednesday, following the decline in U.S. yields prompted by weak

economic data, while investors brace for the significant jobs

data due on Friday.

The benchmark 10-year yield is expected to

hover in a 7.04%-7.08% range, following its previous close of

7.0567%, a trader with a private bank said.

"Bond yields have been as steady as they could have got over

the past few days, clinging to 7.05% level, but the break of

4.20% on the downside for the 10-year U.S. yield could provide

some bullish push," the trader said.

U.S. yields declined, with the 10-year yield

easing to lowest level in a month after the services industry

growth slowed in February, and a gauge of prices paid for inputs

by businesses also fell to 58.6 from an 11-month high of 64.0 in

January.

Weak economic data could nudge the Federal Reserve to

consider earlier action on monetary policy than envisaged, with

the odds for a rate cut in May now standing at 25%, up from 16%

in the previous week, according to the CME FedWatch tool.

Traders now await testimony from Fed Chair Jerome Powell on

Wednesday and Thursday for any cues on policy, which will be

followed by February non-farm payroll data due on Friday.

Back home, bonds did not react to the inclusion of Indian

government notes in another index, as Bloomberg Index Services

said on Tuesday that it would include 34 government securities

eligible for investment via the country's fully accessible route

in its Emerging Market Local Currency Index from Jan. 31, 2025.

"Unlike JPMorgan GBI-EM which is tracking an estimated AUM

of around $230-$240 billion, the BBG EMLC GBI is a much smaller

index, possibly tracking an estimated AUM of around $10-$20

billion, implying India's passive flows impact could be between

$1-$2 billion only," Madhavi Arora, lead economist at brokerage

Emkay Global, said.

KEY INDICATORS:

** Brent crude futures 0.2% lower at $81.90 per barrel,

after easing 0.9% in previous session

** Ten-year U.S. Treasury yield at 4.1584%, two-year

yield at 4.5683%

** RBI to auction Treasury bills worth 340 billion rupees

($4.10 billion)

($1 = 82.8940 Indian rupees)