Informist, Friday, Dec 1, 2023
By Aaryan Khanna
NEW DELHI – Overnight indexed swap rates ended little changed as traders looked past a slew of data in the run-up to the Monetary Policy Committee’s policy meeting next week, dealers said.
The one-year swap rate settled at 6.88%, flat against Thursday’s close. The five-year swap rate ended at 6.54%, compared with 6.52% the previous day.
With India’s economy showing robust growth, hopes of rate cuts in the next 12 months faded further and pushed up the two-year swap rates, dealers said. India’s GDP grew sharply higher than expected at 7.6% in Jul-Sep, driven by a double-digit growth in industry, data released on Thursday by the National Statistical Office showed. An Informist poll of 21 economists had projected GDP to grow at 6.8%.
The one-year swap rates remained unchanged as traders have not priced in rate cuts until Oct-Dec next year, while traders paid fixed rates in the two-year contract which had priced in over 50 bps of rate cuts over 24 months.
The yield on the benchmark 10-year US Treasury note rose to 4.34% at the end of Indian market hours today, as against 4.30% on Thursday. US Treasury yields rose as the initial jobless claims in the US rose by 7,000 to 218,000 in the week ended Nov 25, a period that included the Thanksgiving holiday.
Continuing claims, which are a proxy for the number of people receiving unemployment benefits, rose to 1.93 mln in the week ended Nov 18, higher than all estimates in a Bloomberg survey of economists.
However, none of the data suggested that the US Federal Open Market Committee will hike rates further, dealers said. On the domestic front, the rate-setting panel is likely to keep the policy repo rate at 6.50% and keep its stance unchanged at “withdrawal of accommodation”.
“Trade volumes were decent, but there has been range-bound trade all week,” a dealer at a primary dealership said. “While there is a lot of data that has come and gone, people are just seen consolidating before policy next week in case the RBI springs another surprise.”
OUTLOOK
Swap rates are not traded on Saturday.
On Monday, swap rates may remain steady as traders remain cautious ahead of the Monetary Policy Committee meeting Wed-Fri.
A sharp move in US Treasury yields and crude oil prices may also lend cues at the opening.
The swap rate in the one-year segment is seen at 6.78-7.00%, and in the five-year segment at 6.40-6.60%.
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Saji George Titus
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