RBI may need to do more open market operations to keep bond prices in check amid global tensions: SBI

The report noted that after showing signs of considerable easing in geopolitical frictions towards the latter part of 2025, the year 2026 began on a turbulent note.

It stated "RBI may have to now do more OMOS to keep bond prices in check".

According to the report, renewed circles of conflict, ranging from developments in Venezuela to tensions around Iran, are proving counter-intuitive for energy and commodities markets. These events could lead to erratic price movements, marking a clear departure from outcomes that were widely anticipated just days ago.

The report also flagged Greenland as a potential "Waterloo for world realpolitik," highlighting the fragile global environment.

The report further highlighted that the looming threat to the US Federal Reserve chair could have broader implications for global financial markets.

While the Fed chair is both revered and criticised, the position is seen as a vanguard of institutional autonomy, especially since the turbulent days of the Great Depression.

The report suggested that a similar "deja vu" may be in the making. Whether markets react negatively or not could be the defining factor for price volatility in 2026, it added.

Against this backdrop of heightened global uncertainty, the report said a direct fallout could be sustained pressure on domestic liquidity conditions. It noted that the RBI may need to continue with record OMOs during the current fiscal year to ensure adequate and durable liquidity in the system.

So far in FY26, the RBI has already conducted net OMO purchases worth Rs 5.16 lakh crore. Given the prevailing global uncertainties, SBI expects the central bank may have to undertake additional OMO purchases in the remaining part of the fiscal year to support liquidity needs amid ongoing credit growth.

The report added that a similar trend in OMO operations could also extend into FY27. (ANI)