At 9:44 a.m. (0414 GMT), the 10-year benchmark bond yield was at 8.25 percent, up from 8.21 percent at close on Thursday.

Volumes were a low 19.9 billion rupees ($439 million) on the central bank's trading platform, compared with the usual 30 billion rupees traded in the first 45 minutes of trade.

The one-year rate was at 7.61 percent, up 13 basis points on the day.

The benchmark five-year rate was up 7 basis points on the day at 6.83 percent.

"We should see some selling on the back of risk-on environment and the US, but factory data and auction results will be watched," said a senior trader at a foreign bank.

The US Treasury bond market suffered its worst long bond auction in 2-1/2 years on Thursday as foreign investors shunned it in the wake of a damaging budget battle and downgrade to the credit standing of the United States.

India will sell 30 billion rupees each of 7.83 percent, 2018, and 8.30 percent, 2040, bonds. It will also sell 60 billion rupees of 7.80 percent, 2021, bonds.

India's annual industrial output growth probably slipped further in June to 5.5 percent from a nine-month low of 5.6 percent in May, indicating taut monetary policy and soaring inflation were hindering growth momentum, the median forecast in a Reuters poll showed.

In addition to factory data, inflation data on Tuesday will also be closely watched after data on Thursday showed food inflation accelerated to 9.9 percent in end-July, the highest since mid-March.

Traders said the market was not pricing in any rate increase by the central bank currently but upcoming data is expected to provide clarity.

Copyright Reuters, 2010