New Delhi, Oct. 15 -- Government bond yields may face further upward pressure as continued liquidity absorption by the Reserve Bank of India (RBI), expectations of additional rate increases and elevated global yields keep markets cautious, according to a report by Union Bank of India (UBI).

The report said the pace and composition of the RBI's liquidity absorption through open market operation (OMO) sales, further foreign exchange swaps and reserve accumulation under the Foreign Exchange Reserve Ratio (FERR) would shape domestic liquidity conditions and the outlook for government securities (G-secs).

"The pace and composition of RBI's absorption through OMO sales, any further FX swaps and net reserve accumulation under FERR will shape l...