MUMBAI, Sept 15 (Reuters) - Indian government bonds

edged lower on Monday, as traders awaited the U.S. Federal

Reserve's policy decision due later this week.

The yield on the 10-year benchmark settled at

6.4963%, against the previous session's close of 6.4867%.

Bond yields move inversely to prices.

All eyes are on Fed Chair Jerome Powell's Wednesday

announcement, with traders hunting for dovish signals as the

U.S. labour market shows signs of continued weakening.

The market has already factored in a 25-basis-point cut,

while the odds of an aggregate of 75 bps of rate cuts from now

through December have risen to 83% from 73% last week, according

to the CME FedWatch Tool.

The renewal of the U.S. rate-cutting cycle could unlock room

for India's central bank to resume its own easing path, traders

said.

The Reserve Bank of India, which aims to keep inflation

within the 2%-6% tolerance band, cut rates by 100 basis points

so far this year but held them steady at its last meeting.

Traders are also staying put ahead of this week's state debt

auction.

Indian states are set to sell bonds worth 184 billion rupees

($2.09 billion) on Tuesday.

Additionally, investors await the central bank's upcoming

borrowing plan to see if it adjusts the mix to ease long-bond

supply.

"Analysts anticipate that benign inflation, resilient fiscal

footing, and potential RBI action to address market

(demand-supply) dislocations will revive demand," said Umesh

Tulsyan, managing director at Sovereign Global Markets.

India's consumer price inflation rose to 2.07% in August,

in line with a Reuters poll, but higher than a revised 1.61% in

July.

RATES

India's long-end overnight index swaps ended little changed

on Monday, with traders awaiting the U.S. Fed's policy decision

for further directional cues.

The one-year OIS rate INR1YMIBROIS=CC ended at 5.4750% and

the two-year OIS rate INR2YMIBROIS=CC was at 5.4550%.

The liquid five-year OIS rate INR5YMIBROIS=CC was up 1 bp at

5.71%.

($1 = 88.1620 Indian rupees)