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Indian bond yields end steady; bond sale eyed

* Govt to auction 90 bln rupees ($1.9 bln) bonds on Friday

* Policymakers' statements support positive sentiment-traders (Updates to close)

By Neha D'silva

MUMBAI, Nov 5 (Reuters) - Indian bond yields unwound an early fall on Thursday as traders made room for a $1.9 billion bond auction, but sentiment was supported by an uncertain economic outlook and easy cash conditions.

The yield on the 10-year benchmark bond IN069019G=CC ended at 7.29 percent, one basis point above Wednesday's close of 7.28 percent, after falling as low as 7.24 percent during trade.

Volumes were a heavy 87.40 billion rupees ($1.9 billion) on the central bank's trading platform.

"The credit offtake is not much, equity markets are volatile and there is sufficient liquidity in the system which is pressuring yields lower," said S.K. Chakraborty, general manager, treasury and forex for Allahabad Bank.

"Looking at the growth pattern, it looks unlikely the government would take away incentives it gave to the financial sector immediately and I don't think interest rates would fluctuate that much in the coming 1-½ months," he said.

On Wednesday, deputy chairman of the Planning Commission Montek Singh Ahluwalia said India would miss a target of 9 percent annual growth between 2007/08 and 2011/12 as the global slump and the weakest monsoon in four decades hit output. [ID:nBOM244859]

On Tuesday, Finance Minister Pranab Mukherjee said that fiscal stimulus would be maintained given the economic uncertainty. [ID:nBOM516605]

Dealers said Friday's 90 billion rupee bond auction should attract a good response as underlying sentiment was bullish.

The benchmark five-year interest rate swap closed at 6.61/65 percent after falling as low as 6.53 percent in intra-day deals, which was its lowest since Sept. 10. It had ended at 6.67/71 percent on Wednesday.

In interest rate futures on the National Stock Exchange (NSE), the December contract N10Z9 was implying an yield of 8.0084 percent, marginally above its previous close of 7.9969 percent.

The yield implied in the March contract N10H0 was 8.2897 percent, below its previous close of 8.4293 percent. ($1 = 47 Rupees) (Editing by John Mair)

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Source: in.reuters.com

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