INDIA BONDS-India bond yields seen little changed ahead of state debt sale

By Dharamraj Dhutia

MUMBAI, Oct 31 (Reuters) - Indian government bond yields are likely to trade largely unchanged in early trades on Tuesday, ahead of a fresh supply of state debt, while investors await the U.S. Federal Reserve monetary policy decision due this week.

The 10-year benchmark bond yield is expected to be in the 7.34%-7.38% range, after ending at 7.3701% in the previous session, a trader with a private bank said.

Indian states aim to raise 254 billion rupees ($3.05 billion) through sale of bonds later in the day. The quantum is higher than 156 billion rupees as per the auction calendar.

"We may be in for another rangebound trading session today, and focus would remain on the investor appetite and cutoffs for state debt," the trader said.

"The benchmark yield is unlikely to breach the resistance level of 7.38% unless there is any new trigger."

Indian benchmark bond yield has traded in a narrow 7.31%-7.39% range over the last 10 trading sessions as traders are on the edge, awaiting bond sales by the Reserve Bank of India (RBI).

Earlier this month, RBI Governor Shaktikanta Das said the central bank aims to sell bonds via auctions to manage liquidity in the banking system.

While the market expects around 500 billion rupees of such sales this quarter, investors are unsure of when they may start, especially as the RBI has stepped up bond sales via screen-based trades.

The 10-year U.S. Treasury yield was around 4.90%. The Fed is expected to keep rates unchanged, but the commentary from Chair Jerome Powell will be critical.

The benchmark Brent crude oil contract was below the $90-per-barrel mark, ahead of key central bank meetings and as tensions in the Middle East remained elevated. KEY INDICATORS: ** Brent crude futures up 0.7% at $88.05 per barrel after easing 3.3% in the previous session ** 10-year U.S. Treasury yield at 4.8878%, two-year yield at 5.0436% ** Fifteen Indian states to raise 254 billion rupees via sale of bonds ($1 = 83.2430 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Mrigank Dhaniwala)