MUMBAI, Feb 8 (Reuters) - Indian government bond yields are likely to open lower on Thursday, with traders going into the Reserve Bank of India's last monetary policy decision for the current financial year with a bullish bias.

India's benchmark 10-year yield is expected to hover in the 7.05%-7.09% range till the policy decision due at 10:00 a.m. IST, a trader with a primary dealership said, following its previous close of 7.0723%.

"With no expectation on rates, and only a few optimistically expecting a change in stance, the main theme for today's policy would be liquidity management, which would be one of the major triggers going into the financial year end," the trader said.

The RBI is expected to hold its key interest rate steady, according to a Reuters poll, while commentary from the policymakers will be in focus amid easing inflationary pressures and a fiscally prudent federal budget announcement last week.

Guidance on banking system liquidity has also become crucial, after the central bank moved to withdraw cash from the banking system since the start of this month.

The RBI has conducted two separate overnight variable rate reverse repo auctions in the last two sessions, following four-day VRRRs earlier.

With the Federal Reserve still non-committal on their policy pivot, the RBI is likely to avoid a pre-emptive dovish shift, while inflation and growth projections for the current financial year are expected to be maintained, DBS said.

Following the policy, traders would await fresh debt supply via weekly auction on Friday, wherein the central bank aims to raise 330 billion rupees ($3.98 billion) through sale of bonds, which includes the benchmark bond.

Traders are also eyeing U.S. Treasury yields, which have been in a slight contrasting zone compared to their Indian counterpart amid a pushback in Fed rate cuts.

The 10-year U.S. yield was around 4.10%, while the odds of a Fed rate cut in May have declined to around 64% from 95% last week.

KEY INDICATORS:

** Brent crude futures 0.3% higher at $79.50 per barrel, after rising 0.8% in previous session

** 10-year U.S. Treasury yield at 4.0941%, two-year yield at 4.4162%

** RBI's monetary policy decision announcement ($1 = 82.9760 Indian rupees) (Reporting by Dharamraj Dhutia; Editing by Varun H K)