MUMBAI - Indian government bond yields eased on Friday, led by longer-duration bond yields, as investors indulged in value-buying after a spike in the previous session.

The 10-year benchmark 7.26% 2032 bond yield ended at 7.4161%, after closing higher at 7.4386% on Thursday. The yield was flattish for the week after rising by 15 basis points (bps) in the last three weeks.

"There was value buying today, as U.S. yields also retraced from highs, and the rupee saw very strong appreciation, which lifted the overall sentiment," said Pawan Somani, head of fixed income at Knight Fintech Research.

"The next major trigger point would be inflation data that will provide clarity on the Reserve Bank of India's (RBI) April move."

The Indian rupee gained 0.8% on Friday against the dollar, posting its biggest single-session rise in nearly four months after inflows in equity markets.

Longer-duration bond prices rallied, with traders not preferring shorter-duration notes amid bets of tightening liquidity in March.

Market participants expect India's banking system liquidity, which moved into surplus this week, to slip into deficit as the month progresses on heavy tax outflows and financing needs in the last month of the quarter.

The 10-year U.S. yield was off its high of 4.09% but continues to remain above the 4% mark. The two-year U.S. yield, a closer indicator of interest rate hikes, held around 4.90%, further widening the yield curve inversion.

U.S. yields were high amid expectations of 75-100 bps rate hikes by the Federal Reserve on strong economic data and stubbornly high inflation. Since March 2022, the Fed has raised rates by 450 bps to the 4.50%-4.75% band.

Meanwhile, India's retail inflation in February may ease to 6.3%, after rising to 6.52% in January. But this will likely be enough to nudge the RBI, which has raised the repo rate by 250 bps since May 2022 to 6.50%, for another rate hike in April.

(Reporting by Dharamraj Dhutia; Editing by Eileen Soreng and Janane Venkatraman)