After the market had closed on Tuesday the Reserve Bank of India said the buyback would be done through open market operation (OMO). The bonds are: 7.99 percent maturing in 2017, 7.80 percent 2021, 8.08 percent 2022 and 8.26 percent 2027.

"We would not read the announcement of OMOs as an "easing" move considering the current inflation trend. OMOs aim to prevent unintended tightening in domestic liquidity and a further rise in short-term rates," economists at Morgan Stanley wrote in a note.

By 10:20 a.m. (0450 GMT), the yield on the new 10-year benchmark bond was at 8.77 percent, down 6 basis points from its close on Tuesday.

Total volumes on the central bank's electronic trading platform were at a high 51.55 billion rupees ($988 million), compared with the usual 25 billion to 35 billion rupees dealt in the first hour and half of trade.

The central bank had bought back bonds worth 94.35 billion rupees last week, which helped ease the pressure on funds with banks but liquidity conditions still remain tight.

Borrowings by banks from the central bank's liquidity adjustment facility on Tuesday stood at 933.95 billion rupees, after shooting above 1 trillion rupees since second week of November. The figure is still well above the central bank's comfort zone of 1 percent of banks' total deposits.

"The market is expecting a soft growth data, so yields have eased due to that as well. A higher number would again cause a sell-off," a senior dealer with a foreign bank said.

The economy probably grew an annual 6.9 percent in the quarter through September, at its weakest pace in more than two years, the median forecast from a poll of 22 economists showed.

The data is due around 11 a.m. (0530 GMT).

Traders said they would also await results of an auction of foreign institutional limits in government and corporate debt, likely post market hours.

Lined-up debt supplies will keep the floor on bond yields intact with liquidity set to stay in the deficit mode.

The government is set to sell on Friday 130 billion rupees of bonds. These are: 40 billion rupees of 7.83 percent 2018 bonds, 60 billion rupees of 8.79 percent 2021 bonds and 30 billion rupees of the new 19-year 2030 bond.

Finance Minister Pranab Mukherjee last Friday sought parliamentary nod for a net additional spending of 568.5 billion rupees for the fiscal year ending March, increasing fears the government will not be able to meet its fiscal deficit aim of 4.6 percent of GDP.

India's fiscal deficit is likely to breach the budgeted target and reach 5.5 percent of gross domestic product in the current fiscal year, forcing New Delhi to borrow 353 billion rupees more from the market, a Reuters poll showed on Tuesday.

How the government chooses to bridge the deficit -- through dated papers or short-term cash management and treasury bills -- would be crucial for bond market direction, traders said.

The one-year overnight indexed swap rate was down 4 basis points at 8.05 percent, while the benchmark five-year swap rate dropped 5 basis points to 7.26 percent.