MUMBAI, June 25 (Reuters) - Indian government bond

yields were largely unchanged in early trade on Tuesday as

investors continued to await inflows into domestic debt that

will be included in a global index later this week.

The benchmark 10-year yield was at 6.9719% as

of 10:00 a.m. IST, following its previous close of 6.9741%.

"We have not yet witnessed any major passive inflows and

that should be a major trigger for the next round of decline in

yields, but till then we will trade sideways," a trader with a

state-run bank said.

Indian bonds will be included in JPMorgan's ( JPM ) widely-tracked

emerging market debt index on June 28.

Inflows into bonds under the so-called fully accessible

route have risen to more than $10 billion since the inclusion

was announced in September.

Investors have pre-positioned for the inclusion to some

extent and are bullish on India, allocating 3.6% of holdings in

the country's bonds as of end-May, said Min Dai, head of Asia

Macro strategy at Morgan Stanley ( MS ).

The bond yield curve has flattened since the start of the

year due to strong foreign inflows, narrowing the spread between

the two-year and 10-year yields, DBS said.

"Beyond the index inclusion, supply-demand dynamics will be

under watch when the FY25 (national) Budget is tabled. We do not

expect an increase in the scale of borrowings vs what was

outlined back in the interim budget," Radhika Rao, executive

director and senior economist at DBS, said in a note.

Foreign banks have also stepped up purchases of bonds,

especially those of longer maturities, and the market is

expecting heavier flows by the end of the week.

The 10-year U.S. Treasury yield continued to hover around

4.25% during Asian hours as investors await key U.S. inflation

data this week.

Meanwhile, nine Indian states will aim to raise 170.71

billion rupees ($2.05 billion) through a sale of bonds in the

last auction for this quarter.

($1 = 83.4475 Indian rupees)