MUMBAI, Jan 27 (Reuters) - Indian government bond yields were expected to rise marginally in the early session on Friday, as the market awaited a fresh supply of debt via a weekly auction later in the day, the third consecutive trading day of bond sale.

The benchmark 10-year yield could move in the 7.33%-7.37% range till the debt auction, a trader with a private bank said. The yield ended at 7.3480% on Wednesday.

The Indian market was closed on Thursday.

"The market will be able to absorb the supply, but should command higher yields," the trader said.

The government plans to raise 300 billion rupees ($3.68 billion) through the sale of bonds, including liquid 14-year bonds.

The government on Wednesday raised 80 billion rupees via the sale of 5-year and 10-year green bonds, the first such sovereign issuance.

India's large state-run insurer and government-owned banks snapped up at least half of the bond issue, said five treasury officials, including those with state-run banks and primary dealerships.

"We saw good demand from state-run banks and insurance companies, with the latter cornering one-fourth of the auction," a senior treasury official at a state-run bank said, requesting anonymity as the information is not public.

Friday's auction would be followed by the Union budget on Feb. 1, with the government's fiscal consolidation path and borrowing calendar for fiscal 2024 set to be the next triggers.

The government will borrow a record 16 trillion rupees in the fiscal year ending March 2024, according to a Reuters poll of economists.

Some economists feel the gross market borrowings could come in below market expectations as a pool of securities raised to compensate states for a shortfall in goods and services tax may not be rolled over. KEY INDICATORS:

** Brent crude futures up 0.2% at $87.66 per barrel, after rising 1.6% in previous session

** 10-year U.S. Treasury yield at 3.5150% and two-year note at 4.1908%

** India to sell federal government bonds worth 300 billion rupees

** RBI to set underwriting fees for bonds worth 300 billion rupees

** RBI to conduct 14-day variable rate reverse repo auction for 1 trillion rupees ($1 = 81.4180 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Sohini Goswami)