Indian bond yields edge up, auction well received

* Result of $1.9 bln bond auction better than market hopes

* Market seen rangebound in the coming week - trader

By Neha D'silva

MUMBAI, Nov 6 - Indian federal bond yields ended slightly higher on Friday, finding little impetus from better-than-expected auction results as uncertainty about the strength of economic recovery remained.

The yield on the Indian 10-year benchmark bond <IN069019G=CC> closed at 7.31 percent, above Thursday's closing of 7.29 percent.

It traded in a narrow band of 7.29-7.33 percent on the day.

Volumes were a heavy 104.85 billion rupees on the central bank's trading platform.

"Market is in a trading band and this auction was comfortably bid," said Parijat Agrawal, head of fixed income, SBI Funds Management.

"Economic indicators and subsequent auctions would be watched closely by the market," he said, adding he saw the 10-year yield in a range of 7.25-7.35 percent next week.

The 10-year bond yield had risen more than 200 basis points so far this year, mainly on supply concerns.

Cut-off yields in Friday's 90 billion rupee bond auction were lower than market expectations, and the auction was fully covered by the market. [ID:nMBI005857].

Next week, an auction of 41.06 billion rupees of state loans is set for Nov. 10 and the government will auction 100 billion rupees of bonds on Nov. 13.

The government has scheduled auctions of 840 billion rupees second half of 2009/10, of which it has already sold 390 billion rupees since October including Friday's sale. Some dealers said demand for debt could improve as supply levels drop.

In interest-rate futures on the National Stock Exchange , the December contract <N10Z9> was implying an yield of 8.0104 percent, above its 7.9635 percent previous close.

The yield implied in the March contract <N10H0> was 8.2956 percent, below its previous close of 8.3567 percent.

The benchmark five-year interest rate swap ended at 6.62/65 percent, barely changed from previous close of 6.61/65. [IN-SWAPS]