Home Commodity Market News India IRS Review:5-year swap dn, large corporate receives fixed rates

India IRS Review:5-year swap dn, large corporate receives fixed rates


Informist, Wednesday, May 25, 2022


By Shubham Rana


NEW DELHI – The 5-year overnight indexed swap rates ended sharply lower today, likely as a large corporate house received fixed interest rates to balance risk on its bond issue, dealers said. Traders also received fixed rate noting a sharp overnight fall in the 10-year US Treasury note yield.


The one-year swap rate settled at 6.09% as against the previous close of 6.12%, while the five-year swap rate closed at 6.82% compared with 6.93% on Tuesday.


The yield on the benchmark 10-year US Treasury note ended 10 basis points lower on Tuesday at 2.73% as investors rushed to government bonds during a sell-off in stock markets.


US yields remained close to Tuesday’s closing level today ahead of the release of the minutes of the Federal Open Market Committee meeting earlier this month.


A large corporate was seen hedging fixed-rate liability on the bonds issued recently for the second straight day by receiving the fixed rate in OIS, dealers said.


The corporate looked to hedge their interest rate exposure through overnight indexed swap rates and received a large quantum on fixed interest rates in the five-year OIS contracts, pushing the swap rate lower.


“The 5-year swap was supported around the 6.90% level, but the fall in US yields dragged the rate below that level,” a dealer at a private bank said. “The 1-year OIS has come down because of market expectations of a less aggressive rate hike in June.”


The 1-year OIS has come down 12 bps since Friday as traders have unwound their paid positions after the Centre took steps on Saturday to bring down the near eight-year-high inflation, including a sharp cut in the excise duty on petrol and diesel. 



On Thursday, swap rates are seen steady amid lack of fresh cues on interest rates, dealers said.


Some traders may look to receive fixed rates on view that the Reserve Bank of India’s Monetary Policy Committee may not hike rates aggressively after the Centre announced a host of measures to bring down the rising inflation, dealers said.


Traders who had placed large bets in the one-year OIS on view of a 75-bps rate hike may look to unwind their paid positions.


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 6.00-6.30%, and the five-year at 6.90-7.15%.



At 1530 IST


1-year OIS



2-year OIS



5-year OIS



2-year MIFOR


5-year MIFOR




US$1 = 77.53 rupees

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


Edited by Akul Nishant Akhoury



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Source: Cogencis



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