MUMBAI, Sept 16 (Reuters) - Indian government bond

yields are expected to be boxed in a narrow range in early deals

on Tuesday ahead of debt supply from states, while the market

braces for the all-important interest rate decision from the

U.S. Federal Reserve a day later.

The yield on the 10-year benchmark note is

expected to be in the 6.48%-6.52% range, a trader said at a

private bank. It closed at 6.4963% on Monday.

Indian states aim to raise 184 billion rupees ($2.09

billion) through the sale of bonds later in the day, with the

quantum considerably lower than the scheduled 236 billion

rupees.

"The benchmark bond yield should remain close to the 6.50%

mark, and since the state debt sale is not very large, we expect

it to be absorbed without any major hindrance," the trader said.

The Fed's decision is due after market hours on Wednesday,

where a 25-basis-point rate cut is already factored in, with a

thin possibility of a 50-bps move.

Market participants will also scrutinize the forward

guidance and rate projections for signals on the likelihood of

further cuts in 2025.

The odds of an aggregate of 75 bps of rate cuts from now

through December stand at 71%, according to the CME FedWatch

Tool.

Meanwhile, bonds are unlikely to react much to the Bloomberg

News report that JPMorgan will cut India's weightage in its

emerging market bond index by 100 basis points to 9% from the

next year.

The news comes at a time when foreign investors have been

pouring money into Indian bonds over the last few weeks as the

interest rate differential between Indian and U.S. yields rises.

RATES

India's overnight index swaps are expected to be largely

neutral ahead of the Fed policy decision.

The one-year OIS rate ended at 5.4750% on

Monday, and the two-year OIS rate settled at

5.4550%. The liquid five-year OIS rate was at

5.71%.

KEY INDICATORS:

** Benchmark Brent crude futures were up 0.3% at

$67.65 per barrel, after rising 0.7% in previous session

** Ten-year U.S. Treasury yield was at 4.0432%;

two-year yield at 3.5388%

** Indian states to raise 184 billion rupees via sale of

bonds

($1 = 88.1220 Indian rupees)