India IRS Review: Rates up on rise in US ylds; trade volumes low


IRS Review: Rates up on rise in US ylds; volumes low

Tuesday, Oct 22


By Suyash Pande


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MUMBAI- Overnight indexed swap rates inched up today amid low trade volumes because an increase in US Treasury yields prompted market participants to unwind received positions, dealers said. 


The one-year OIS settled at 5.06-5.08% as against 5.03-5.10% on Friday, while the five-year swap closed at 5.12-5.14% against 5.08-5.15% at the previous close. Domestic financial were shut on Monday because of assembly elections in Maharashtra.


Yield on the 10-year US Treasury note rose by 4 basis points to settle at 1.80% on Monday. Higher yields on US tend to reduce foreign ’ appetite for assets in riskier emerging markets such as India.

The market shrugged off the minutes of the Reserve Bank of India’s Oct 1-4 monetary policy even as they suggested more monetary policy easing, dealers said.


In the minutes, released after market hours on Friday, RBI Governor Shaktikanta Das said it was necessary to make “all out efforts” to boost investment and private consumption. The central bank has lowered the repo rate by a cumulative 135 basis points in 2019 to revive slowing economic growth. Most expect at least 25 bps more of rate cuts in coming months. 


Given that the OIS market has already factored in around 30 bps more of rate cuts, the minutes did not give traders fresh reason to drag rates lower, dealers said. OIS rates typically trade around 25 bps above the repo rate, which currently stands at 5.15%.


“There was no major takeaway from the MPC minutes,” a dealer with a private bank said. “Trade volumes are very low because there are not many cues in the market right now.” 




OIS rates may open steady on Wednesday in the absence of fresh cues on interest rates. Trade volumes may be muted in the ongoing festival season. 




Any sharp overnight movement in US Treasury yields or global prices may steer swaps in early trade.


The one-year OIS is seen in a band of 5.02-5.08% while the five-year swap is seen at 5.08-5.12%.

  At 1700 IST Friday’s close 
1-year OIS 5.06-5.08% 5.03-5.10%
2-year OIS 4.96-4.98% 4.97-4.99%
5-year OIS 5.12-5.14% 5.08-5.15%
1-year MIFOR
2-year MIFOR 6.14-6.29% 6.04-6.19%
5-year MIFOR 6.50-6.65% 6.40-6.55%


US$1 = 70.9300 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT


Edited by Akul Nishant Akhoury


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