(Updates to open) 
    MUMBAI, Dec 13 (Reuters) - Indian federal bond yields rose on 
Thursday as expected outflows for a bond auction and tax payments 
by firms prompted investors to sell bonds to manage a possible 
cash crunch. 
    At 9:35 a.m. (0405 GMT), the yield on the 10-year federal 
bond <IN079917G=CC> was at 7.88 percent, a tad higher from 
Tuesday's close of 7.87 percent. 
    Cash conditions have been tight since mid-November after the 
central bank raised banks' reserve requirements, draining about 
160 billion rupees ($4.1 billion) from the banking system. 
    Bond auctions on Friday and outflows toward corporate tax, 
which is estimated at about 350 billion rupees from the middle of 
this month, are expected to squeeze liquidity further. 
    The central bank will auction 70 billion rupees of bonds on 
Friday. Reflecting tight cash conditions, banks borrowed 48.25 
billion rupees from the central bank on Wednesday, the first time 
in almost a week. 
    "We see the market wedged in a thin range. Cash conditions 
should improve by the beginning of January and indications that 
the rate tightening cycle has peaked should keep sentiment 
stable," a trader with a foreign bank said. 
    The U.S. Federal Reserve trimmed the benchmark overnight 
lending rate by 25 basis points on Tuesday to 4.25 percent and 
also lowered the discount rate, at which banks can borrow 
directly from the Fed, by the same amount to 4.75 percent. 
    The Indian central bank has said in the recent past that 
global developments were becoming increasingly important, though 
domestic factors still play a dominant role. 
    The Reserve Bank of India's short-term lending rate is at 
7.75 percent, unchanged since March. 
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                       MARKET SNAPSHOT 
    Bombay Sensitive Index         <.BSESN> 
    Indian rupee (/$)              <INR=IN> 
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 ($1=39.4 rupees) 
 (Reporting by Anurag Joshi; Editing by Ranjit Gangadharan) 
 (([email protected]; Reuters Messaging: 
[email protected], Tel: 91-22-6636 9038)) 
Keywords: MARKETS INDIA MONEY