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India IRS Review: A tad dn; volumes muted on caution before FOMC meet

Informist, Monday, May 2, 2022

 

By Shubham Rana

 

NEW DELHI – Overnight indexed swap rates closed slightly lower today amid dismal trade volumes as traders stayed on the sidelines on caution ahead of the US Federal Open Market Committee’s two-day meeting, set to begin on Tuesday.

 

The one-year swap rate settled at 5.03% against the previous close of 5.05% and the five-year swap rate closed at 6.59% against 6.62% on Friday.

 

The Federal Reserve is widely expected to hike key interest rate by 50 basis points on Wednesday and traders around the world also expect the Fed to start reducing its large balance sheet.

 

“There were no triggers in the OIS market today, neither domestically nor offshore, which is why the market was quite dull today,” a dealer at a primary dealership said. “Right now people are just waiting for what the Fed does on Wednesday with respect to rate hikes, balance sheet reduction and forward guidance.”

 

A fall in crude oil prices today led to traders receiving higher fixed rates on swaps, especially in the five-year segment, dealers said.

 

Crude oil prices came down today due to rising concerns over weak economic growth in China. Brent crude contract for July delivery fell nearly $2.5 per barrel today after data on Saturday showed that factory activity in China contracted for a second month to its lowest since February 2020 because of COVID-19 lockdowns.

 

Volumes were also low today because of a curtailed trading week as money markets will remain closed on Tuesday for Id-ul-Fitr.

 

OUTLOOK

Money markets will be closed on Tuesday on account of Ramzan Id-ul-Fitr.

 

On Wednesday, swap rates are seen steady as traders may keep to the sidelines due to lack of major domestic cues on interest rates.

 

Traders may also avoid large bets in the run-up to the US Federal Reserve’s policy meeting, which begins on Tuesday.

 

Any sharp movement in crude oil prices and US Treasury yields might lend cues when the market opens.

 

The swap rate in the one-year segment is seen at 4.85-5.10% and the five-year at 6.40-6.65%.

 

 

At 1530 IST

Friday

1-year OIS

5.03%

5.05%

2-year OIS

5.88%

5.91%

5-year OIS

6.59%

6.62%

2-year MIFOR

6.45-6.59%6.45-6.59%

5-year MIFOR

6.85-6.99%6.85-6.99%

 

End

US$1 = 76.52 rupees

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

 

Edited by Deepshikha Bhardwaj

 

 

Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to [email protected]

 

© Informist Media Pvt. Ltd. 2022. All rights reserved.

 

Source: Cogencis

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