India IRS Review:Steady on caution ahead of Oct-Dec GDP data due Fri
Tuesday, Feb 25
By Suyash Pande
MUMBAI – Overnight indexed swap rates ended steady today as market participants refrained from placing large bets after a sharp fall in swap rates on Monday and as caution prevailed before data on GDP growth in Oct-Dec, due on Friday, dealers said.
The one-year OIS settled at 5.06-5.10%, against 5.05-5.09% on Monday, and the five-year swap closed at 5.14-5.18% compared with 5.13-5.17%.
Swap rates had fallen by 6-11 basis points on Monday, tracking a slump in US Treasury yields and crude oil prices.
The yield on the 10-year US Treasury note settled 8 basis points lower at 1.38% on Monday. Typically, a fall in US Treasury yields prompts foreign portfolio investors to purchase higher-yielding fixed income assets in riskier emerging markets such as India.
Crude oil futures for April delivery on the New York Mercantile Exchange fell $1.95 to $51.43 per barrel on Monday. The contract was last at $51.37 per barrel. A fall in crude oil prices has a softening impact on domestic inflation and strengthens the case for the Reserve Bank of India to lower interest rates.
“The market is mainly tracking movement in crude prices and US yields and after the fall today there are largely no major cues,” a dealer with a primary dealership said.
Market participants avoided placing large bets before the release of Oct-Dec GDP data, due to be released on Friday. Investors do not expect a remarkable recovery in India’s economic growth after GDP growth fell to a 26-quarter low of 4.5% in Jul-Sep.
“There will not be anything major to look at in the data but the coronavirus has made it important…the kind of growth number that will be there for this quarter,” a dealer said.
The spread of coronavirus has fuelled fears over the impact on global economic growth. The International Monetary Fund said global growth could fall by 10 basis points. Last month, the agency had lowered its global growth forecast for 2020 to 3.3%.
OIS rates are likely to open steady on Wednesday as market participants may avoid large bets before the release of Oct-Dec GDP data.
Any sharp movement in crude oil prices and US Treasury yields may provide cues at open. The yield on the 10-year US Treasury note is close to its record low of 1.32%, given the uncertainties to global growth due to coronavirus.
The one-year OIS is seen in a band of 5.00-5.12% and the five-year swap at 5.10-5.20%.
|At 1700 IST||MONDAY|
Edited by Avishek Dutta
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