INDIA BONDS-India bond yields seen little changed before debt sale, oil moves key

MUMBAI, Sept 15 (Reuters) - Indian government bond yields are likely to trade largely unchanged in early session on Friday, as market participants await weekly supply amid rising crude oil prices.

The new 10-year benchmark 7.18% 2033 bond yield is likely to trade in a 7.08%-7.13% range until the debt sale, after ending the previous session at 7.1048%, a trader with a private bank said.

New Delhi aims to raise 310 billion rupees ($3.73 billion) through sale of bonds later in the day.

Underlying bond market sentiment has been boosted on speculation over India's inclusion in global bond indexes.

JPMorgan is likely to come out with a review on inclusion by early October while a review for the FTSE global bond index is due before September end, and that is keeping investors active, traders have said.

"It is that time of the year, when there is some optimism with regards to Indian bonds getting included in the global indexes," the trader said.

"Hence, despite other bearish factors, we saw the benchmark yield moving all the way to 7.10%."

India's market borrowing could be less than expected for the current fiscal year if small savings are more than projected, Economic Affairs Secretary Ajay Seth told Reuters on Thursday.

Meanwhile, oil prices continue to rise, with the benchmark Brent contract rising to its highest level in 10 months, amid persistent supply worries.

India is one of the largest importers of the commodity. Inflation eased to 6.83% in August from 7.44% in July but remained above the central bank's target band for second consecutive month.

The 10-year U.S. Treasury yield continues to remain elevated, even as market expects the U.S. Federal Reserve to maintain a status quo on interest rates next week. KEY INDICATORS: ** Brent crude futures were 0.6% higher at $94.25 per barrel, after rising 2% in the previous session ** 10-year U.S. Treasury yield at 4.2823%, two-year yield at 5.0072% ** India to sell sovereign bonds worth 310 billion rupees ** RBI to set underwriting fees for 310 billion rupees sovereign bond auction ($1 = 83.0300 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Mrigank Dhaniwala)