The benchmark 10-year bond yield , which in early trade climbed to 8.55 percent -- its highest since Sept. 29, 2008 -- edged down by 12:10 p.m. (0640 GMT) to 8.53 percent, 1 basis point lower than its close on Monday.
It traded in the 8.51-8.55 percent range in the day.
The yield has jumped 19 basis points since last Thursday, when the government announced its higher-than-expected second-half borrowing schedule for the current fiscal year.
Total volume on the central bank's electronic trading platform was 35.85 billion rupees ($728.7 million) lower than an average 40 billion to 45 billion rupees usually dealt in the first three hours of trade.
"There is some buying interest at the 8.54-8.55 level, so we are seeing some resistance there," said Srinivas Reddy, senior manager of treasury at Andhra Bank.
"Bonds took cues from the US yields and crude prices in the morning, but (local) equities are choppy, so some buying is coming in bonds."
Traders said Friday's supply is widely seen as a litmus test of investor appetite for government bonds and could limit the fall in yields.
"Bond yields may inch towards 8.60 percent around supply, unless there is a (positive) statement on interest rate and borrowing from the central bank or the government," said Debendra Dash, a fixed-income dealer with Development Credit Bank.
India will sell 150 billion rupees of bonds on Oct. 7. The government will sell 30 billion rupees each of 8.07 percent 2017 bonds, 8.28 percent 2027 bonds, and 8.30 percent 2040 bonds. It will also sell 60 billion rupees of 8.08 percent 2022 bonds.
Fears the central bank may continue to raise policy rates despite domestic growth worries to tame inflation may also keep yields from slipping lower, traders said.
India's food and fuel inflation accelerated in mid-September, indicating persistently high inflationary pressures in the economy which may prompt the Reserve Bank of India (RBI) to continue to tighten rates.
However, a private survey on Monday showed manufacturing growth nearly stalled in September, its weakest showing since March 2009, on slowing output and order growth as a year-and-a-half of interest rate increases and weakening global conditions took a toll on Asia's third-largest economy.
US Treasuries prices surged on Monday as news Greece will miss its deficit target drove stocks lower amid bets the Federal Reserve's latest stimulus programme will contribute to a further erosion of rates.
In Asian trade, the 10-year benchmark US bond yield was at 1.7764 percent, lower than 1.80 percent in late US trade on Monday.
The benchmark five-year swap was 4 basis points lower at 7.11 percent from Monday's close and the one-year rate was at 7.87 percent from 7.90 percent previously.