NEW DELHI/MUMBAI: The Indian government may hold more debt auctions after its last scheduled tender for the fiscal year on Friday, two people familiar with the matter said, to take advantage of the relatively low cost of borrowing.

The government had cancelled its last two weekly debt sales, each worth 240 billion rupees ($3.2 billion), as global yields surged and it had achieved a comfortable cash balance for the fiscal year ending on March 31.

But in a move that surprised markets, the government said on Monday it would borrow 230 billion rupees at the last bond sale for the current fiscal year on Feb. 25.

The sources said that while the government had a comfortable cash position even without further auctions, it would consider completing its planned borrowing if market conditions were appropriate.

"(We) will not commit if this would be our last borrowing for the year. We are watching the yields and will take a call accordingly," a senior official directly involved in the matter told Reuters.

A second source said that for the government to borrow now would allow it to take exploit such lower yields.

The sources sought anonymity because the discussions were private.

The 10-year benchmark yield hit a 2-1/2-year high of 6.95% after the government announced record borrowing of 14.95 trillion rupees for 2022/23 in the Feb. 1 federal budget.

The yield, however, has retraced almost all its post-budget gains after the auction cancellations, to stand at 6.73% by 0648 GMT.

The finance ministry did not immediately respond to an email seeking comment.

India's 10-year benchmark 6.54% bond moved up to 98.43 rupees, yielding 6.76% after the Reuters report, versus 98.90 rupees, and a yield of 6.69% on Monday. IN/

Although the government cited a comfortable cash balance as the official reason for the cancelled auctions, sources had told Reuters at the time that officials were concerned about the sharp market reaction to the announced borrowing plan.

Traders warned new auctions could keep pushing yields higher.

"The belief is that we are done with the borrowing for this year. If the government decides to borrow towards the cancelled auctions later, it will lead to a lot of pressure on bonds, especially in the current geopolitical backdrop," said a senior trader at a foreign bank.

"If we have more auctions this year, yields will likely climb back to 6.95% levels," said a trader at a private bank. ($1=74.8325 rupees)

(Reporting by Aftab Ahmed in Delhi and Swati Bhat in Mumbai; Editing by Sam Holmes and Clarence Fernandez) ((Aftab.Ahmed@thomsonreuters.com; +911149548060;))