By Dharamraj Dhutia MUMBAI, Oct 28 (Reuters) - Indian government bonds are expected to be largely unchanged on Tuesday, with the benchmark bond yield hovering close to a crucial level, while traders awaited the U.S. central bank's policy decision this week for triggers. The yield on the benchmark 10-year note may move between 6.53% and 6.56%, a trader at a private bank said. The yield ended at 6.5464% on Monday, its highest closing level in a month. Bond yields move inversely to prices. "There are not many factors for traders to rely on, so we may see another session with shallow volumes and a narrow range," the trader said. "State debt auction is unlikely to be a game changer, but Federal Reserve commentary could impact markets." Indian states will raise 178 billion rupees ($2.03 billion) through the sale of bonds later in the day, with the quantum sharply lower than 309 billion rupees, according to the calendar. The benchmark bond yield is in touching distance of breaking the key level of 6.55%-6.56%, but traders do not expect the level to be breached on Tuesday. Position cutting and short selling, witnessed last week, spilled over to Monday amid expectations that India and the U.S. may strike a trade deal that lowers tariffs. India currently faces up to 50% tariffs on its exports to the United States. A reduction in tariffs could have a much smaller impact on the growth trajectory, potentially limiting future rate cuts. The Indian economy will grow slightly faster than previously expected this fiscal year, a Reuters poll showed, with GDP growth forecasted to average 6.7%. RATES While India's overnight index swap rates are expected to be steady, the tilt is expected to remain on the paying side. The one-year OIS rate inched up to 5.47% on Monday, while the two-year OIS rate settled at 5.4150%. The five-year swap rate closed slightly up at 5.66%. KEY INDICATORS: ** Benchmark Brent crude futures were 0.1% higher at $65.70 per barrel, after easing 0.5% in the previous session ** Ten-year U.S. Treasury yield at 3.9819%; two-year yield at 3.4915% ** Indian states to raise 178 billion rupees through sale of debt ** RBI to conduct overnight variable rate repo auction for 1.50 trillion rupees ($1 = 87.8950 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Eileen Soreng) (The article has been published through a syndicated feed. Except for the headline, the content has been published verbatim. Liability lies with original publisher.)
