Indian bond yields rise tracking U.S. Treasuries

* Bond yields rise in line with higher U.S. Treasury yields

* Traders eye cash outflows from bond supplies this week

* Cash conditions remain tight (Updates to close)

By Anurag Joshi

MUMBAI, Sept 8 (Reuters) - Indian federal bond yields inched up on Monday, tracking higher U.S. Treasury yields, and traders said fresh bond supplies later this week raised concerns of waning demand for debt.

The 10-year benchmark bond yield IN082418G=CC ended at 8.50 percent, above Friday's close of 8.49 percent but below an early high of 8.55 percent. Volume was a high 79.3 billion rupees ($1.8 billion) on the central bank's electronic trading platform.

U.S. government bond yields jumped after the Treasury seized control of embattled mortgage giants Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research). See [ID:nL8697840]

"The sell-off is mostly driven by negative sentiment," a trader with a foreign bank said, adding traders sold bonds to generate cash ahead of the bond auctions.

India's central bank will auction 90 billion rupees of treasury bills on Wednesday and 80 billion rupees of bonds on Friday.

Cash conditions in the money market were tight with overnight rates INROND= ending at 9/9.1 percent, far above the 6 percent mark when cash is ample. ($1 = 44.6 rupees) (Editing by Mark Williams)