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 MUMBAI: Indian federal bond yields are expected to rise on Monday after comments by a central bank official cast doubts about the outlook for rate cuts.

After the market closed on Friday, Subir Gokarn, a deputy governor at the Reserve Bank of India, said the monetary policy stance would not be determined by the fiscal deficit target alone, but would also depend on global oil prices and India's growth.

New Delhi set a fiscal deficit target of 5.1 percent of gross domestic product for 2012/13 in its annual budget on Friday, which is lower than an upwardly revised 5.9 percent for this fiscal year.

A rally in world oil prices could build pressure on inflation in India, which imports about 80 percent of the oil it consumes.

The 10-year benchmark bond yield is seen opening around 8.45 percent and rise towards 8.50 percent, dealers said. It had closed up 6 basis points on Friday at 8.42 percent after hitting 8.44 percent during trade, a level last seen on Jan. 2, as a higher-than-expected market borrowing plan for 2012/13 disappointed.

Copyright Reuters, 2012

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