MUMBAI, Feb 9 (Reuters) - Indian corporate bond yields rose on Monday as sentiment turned cautious ahead of a meeting of government and central bank officials, expected on Tuesday, to finalise a schedule for extra government borrowing.
Stocks, Bonds & Forex Trading source: in.reuters.com

Economic Affairs Secretary Ashok Chawla said a cash and debt management group would meet to work out the funds for the remainder of the current 2008/09 fiscal year ending in March.

"Investors are waiting and watching as an increase in government borrowing will crowd out corporate issues and push up yields, but the government has not ruled out private placement of its bonds and this could help corporate bonds," said a trader.

The yield on Indian Railway Finance Corp's 8.46 percent 2014 bond rose to 8.72 percent, from 8.70 percent at Friday's close.

The yield on the federal 2018 bond ended at 6.33 percent on Monday, higher than 6.19 percent at Friday's close. [IN/]

The government has completed most of its 700 billion rupee additional borrowing for 2008/09, and Friday's 80-billion-rupee bond auction would be the last under the current indicative calendar.

Tuesday's meeting will decide how much more the government will borrow after this auction. However, the central bank governor on Friday pledged to keep the debt market stable as the government ramps up its borrowing. [ID:nBOM423600]

"There was a need to borrow more due to higher expenditure and lower revenue receipt," said Chawla.

Suresh Tendulkar, the chairman of prime minster's Economic Advisory Council, said the fiscal deficit situation was not comfortable and that it was the right time to end state subsidies on fuel prices.

The central bank estimates the federal government fiscal deficit for 2008/09 at 5.9 percent, way above the budget estimate of 2.5 percent.

In the corporate bond market on Monday, Housing Development Finance Corp's 9.9 percent 2013 bond was the most traded, with a volume of 1.5 billion rupees.

Total volume traded on Monday was 10.82 billion rupees, slightly higher than Friday's 10.05 billion rupees, Thomson Reuters data showed, sourced to trades reported on the Bombay Stock Exchange, National Stock Exchange and Fixed Income Money Market and Derivatives Association of India (FIMMDA), a market body.

Volume in January was 266 billion rupees, according to data on the market regulator Securities & Exchange Board of India's web site.
(Reporting by Jeanette Rodrigues; Editing by Harish Nambiar)