The finance minister also said the government was taking steps to bring down food inflation in the next few months.

In its budget last Friday, the government set its gross market borrowing target for 2010/11 at a record 4.57 trillion rupees, up 1.3 percent from the previous year.

Traders fret the market would find it difficult to digest the wall of supplies, with the central bank in a monetary policy tightening mode.

The central bank's bond auction calendar, which will detail the size, frequency of auctions and duration of bonds, expected later this month will set the trend for the near term.

In interest-rate futures on the National Stock Exchange, the March contract N10H0 implied a yield of 8.3123 percent while the June contract was not traded.

The benchmark five-year interest rate swap was at 7.02/05 percent from its previous close of 7.03/06. [IN-SWAPS] ($1 = 45.8 Rupees) (Reporting by Neha D'silva; Editing by Ranjit Gangadharan)