MUMBAI- India's benchmark 10-year bond yield eased on Friday but still posted its fifth straight weekly rise on the back of a record government borrowing calendar, high global crude prices and as it tracked the rise U.S. yields.

On the day, the 10-year yield retreated sharply from a more than two-and-half year high after the Reserve Bank of India chose not to sell two out of the four bonds offered at an auction.

The government raised just 105.25 billion rupees ($1.41 billion) at a debt sale compared to the targeted 240 billion rupees, the central bank said in a release.

The benchmark 10-year yield ended at 6.88% versus 6.89% on Thursday. Earlier in the session, it touched 6.95%, its highest level since June 27, 2019. On the week, it was 11 bps higher, adding to a 14 bps rise last week and up 43 bps so far this year.

The central bank did not accept any bids for 2026 and 2035 bonds, which were bid at a very high price on the back of a heavy short-position build-up in these papers, traders said.

"The sentiment is negative post the budget and unless the RBI announces something to support bond markets, we will see the 10-year yield crossing 7% next week," a senior trader at a private bank said.

Oil prices extended gains above $90 a barrel while U.S. yields jumped as the Bank of England's Thursday interest rate hike underscored the battle central banks face against persistently high inflation. 

The RBI is scheduled to hold its monetary policy committee meeting from Feb. 7-9 and will announce the outcome on Wednesday.

Investors are waiting to see if the RBI chooses to raise the reverse repo rate to start the policy rate normalisation process and are also watching for cues on how it proposes to manage the government's record market borrowing of 14.95 trillion rupees in the next fiscal year.

Over the last two fiscal years, the RBI has absorbed around 25% of net market borrowing, to help contain yields and help the market borrowing go through smoothly.

"However, for some time, the RBI essentially stopped its government securities purchases in a bid to normalise excess liquidity. Now with yields spiking, the RBI's challenge mounts," Edelweiss said in a research note.

Edelweiss said it didn't expect a repo increase on Wednesday but added there is a good possibility of a 25 bps hike in the reverse repo rate as part of normalisation of the policy corridor which should work to push the money market rates higher. ($1 = 74.6720 Indian rupees)

(Reporting by Swati Bhat; Editing by Kirsten Donovan) ((swati.bhat@thomsonreuters.com; twitter.com/swatibhat22; +91-22-68414381; Reuters Messaging: swati.bhat.thomsonreuters.com@reuters.net))