MUMBAI, July 10 (Reuters) - Indian government bond

yields ended marginally down on Wednesday, as traders added

positions ahead of the critical economic data that could likely

guide the U.S. Federal Reserve's interest rate trajectory this

year.

The benchmark 10-year yield ended at 6.9754%,

following its previous close at 6.9883%.

"Some foreign demand lifted bond prices today, and

underlying sentiment continues to remain bullish," said VRC

Reddy, treasury head at Karur Vysya Bank.

"The upcoming inflation data will be a crucial trigger."

Foreign holding of the benchmark bond has risen above 50

billion rupees ($598.84 million) or 5% of the total outstanding,

while foreign banks have bought over 130 billion rupees of bonds

so far in July, data showed.

U.S. retail inflation data is due after Indian market hours

on Thursday. A Reuters poll estimates the reading at 0.1%

month-on-month, while consumer prices for 12 months to June are

expected to have risen 3.1%.

Fed Chair Jerome Powell, in prepared remarks to U.S.

Congress, acknowledged inflation pressures have eased, but did

not give any strong signals about the timing of interest rate

cuts.

The comments pushed U.S. yields higher on Tuesday, their

first rise in five sessions. The 10-year yield had risen above

the 4.30% mark briefly but eased in Asian hours on Wednesday.

Even though the Fed has not provided strong indications, the

market has assumed that the rate easing cycle will begin in this

quarter. The odds for a September action are hovering around 75%

while bets of 50 bps cuts in 2024 remain intact, according to

CME FedWatch Tool.

Traders also await the consumer inflation data for India,

due after market hours on Friday.

A Reuters poll predicted that retail inflation edged up in

June, snapping five months of declines, largely because of a

jump in vegetable prices. The poll of 54 economists forecast a

4.80% year-on-year rise in retail inflation, up from 4.75% in

May.

($1 = 83.4950 Indian rupees)

(Reporting by Dharamraj Dhutia; Editing by Janane Venkatraman

)