* 10-year bond yield ends at 8.60 pct, up 5 bps on day     * Traders to await U.S. non-farm payrolls for direction     * Ten-year seen holding between 8.45 and 8.70 pct until policy      By Swati Bhat     MUMBAI, Oct 21 (Reuters) - Indian government bonds fell on Monday, snapping two days of gains as caution set in a day before the U.S. non-farm payrolls data that could swing expectations about when the Federal Reserve will start to taper its stimulus programme.     Traders said the absence of a debt sale this week was a positive for bonds, although a large state-loan auction of 108.8 billion rupees on Tuesday was offsetting some of that impact.     Trading is expected to remain range-bound as investors also gear up for the Reserve Bank of India's policy review on Oct. 29, amid expectations the central bank will raise interest rates for a second consecutive month.     "The rupee weakness hurt sentiment for bonds. With no major data releases due, the market is expected to be range bound between 8.45 and 8.70 percent until the policy review," said Bekxy Kuriakose, head of fixed income at Principal PNB Asset Management.     "A repo rate hike is possible but it is only partly factored in," she added.     The benchmark 10-year bond yield  
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   closed at 8.60 percent, up 5 basis points on the day.     Traders will also continue to monitor the rupee's moves for direction in the near-term. The partially convertible rupee  
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   closed at 61.52/53 per dollar.  
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       The U.S. September jobs report, which was delayed due to the shutdown, is due on Tuesday. If it beats expectations, speculation over whether the Fed can taper this year is likely to return, according to some analysts.     In the overnight indexed swap market, the benchmark 5-year swap rate  
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   closed up 4 bps at 8.24 percent while the 1-year rate closed  
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   up 2 bps at 8.43 percent.   (Editing by Gopakumar Warrier)  ((swati.bhat@thomsonreuters.com)(+91-22-6180 7353; Reuters Messaging: swati.bhat.thomsonreuters.com@reuters.net))  Keywords: MARKETS INDIA BONDS/