How to update yaml file using python

The ruamel.yaml package was specifically enhanced (by me starting from PyYAML) to do this kind of round-trip, programmatic, updating.

If you start with (please note I removed the extra initial spaces):

init_config: {}
instances:
    - host: <IP>              # update with IP
      username: <username>    # update with user name
      password: <password>    # update with password

and run:

import ruamel.yaml

file_name="input.yaml"
config, ind, bsi = ruamel.yaml.util.load_yaml_guess_indent(open(file_name))

instances = config['instances']
instances[0]['host'] = '1.2.3.4'
instances[0]['username'] = 'Username'
instances[0]['password'] = 'Password'

yaml = ruamel.yaml.YAML()
yaml.indent(mapping=ind, sequence=ind, offset=bsi) 
with open('output.yaml', 'w') as fp:
    yaml.dump(config, fp)

The output will be:

init_config: {}
instances:
    - host: 1.2.3.4           # update with IP
      username: Username      # update with user name
      password: Password      # update with password

The ordering of mapping keys (host, username and password), the style and the comments are preserved without any further specific action.

Instead of having the indent and block sequence indent guessed, you can do a manual traditional load, and set the indent values yourself:

yaml = ruamel.yaml.YAML()
yaml.indent(mapping=6, sequence=4)
with open(file_name) as fp:
    config = yaml.load(fp)

---

If you look at the history of this answer, you can see how to do this with a more limited, PyYAML like, API.