Indian government, RBI to discuss high bond yields at borrowing meeting - sources

NEW DELHI (Reuters) - India's finance ministry will raise its concerns about the sharp rise in bond yields when it holds a meeting with the central bank to discuss government borrowing plans, two people familiar with the matter said.

A persistent rise in bond yields has raised worries among senior government officials about a potential increase in overall interest rates in the economy.

"The fundamentals of the market do not command such high yields," said one of the people. "The rise in yields will eventually push up interest rates in general in the economy."

The meeting, the first in a series of debt management talks with the Reserve Bank of India scheduled over the next one month, will discuss the timing, tenure and tools of government financing over the next financial year, the people said.

The government will also raise the possibility of the RBI buying bonds via open market operations (OMOs) to keep yields lower and infuse liquidity, one of the people said, though the final decision on whether it does so rests with the central bank.

One of the people said the government would not seek to borrow the amounts that would have been raised at a cancelled bond auction last week as it was comfortable with its cash position.

Both the RBI and finance ministry did not have an immediate comment on the planned discussions.

(Reporting by Suvashree Dey Choudhury and Neha Dasgupta; Editing by Sam Holmes)