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Thursday, September 29, 2022

India IRS Review: Mixed; 5-year OIS ends up as crude oil rises

Informist, Friday, Jun 10, 2022

 

By Shubham Rana

 

NEW DELHI – Overnight indexed swap rates traded on a mixed note today, with the 5-year swap ending sharply up as offshore traders paid higher fixed rate tracking a rise in crude oil prices, dealers said.

 

The one-year swap rate ended at 6.25% against the previous close of 6.23%, and the five-year swap rate closed at 7.17% against 7.12% on Thursday.

 

Crude oil rose today due to strong demand in the US. The Brent crude contract for August delivery rose to $123.96 per barrel after falling to $121.60 in early trade.

 

“Crude was up late in the day which immediately led to late overseas paying in the OIS,”  a dealer at a primary dealership said.

 

The 1-year OIS ended near the previous closing level as traders avoided placing large bets after the outcome of the Monetary Policy Committee meeting on Wednesday was on expected lines, dealers said.

 

The Reserve Bank of India’s rate-setting panel hiked the repo rate by 50 basis points to 4.90% on Wednesday. 

 

While the gilt market traders see the terminal rate to close to 5.50-5.75%, OIS traders are still looking at a terminal rate of close to 6%, keeping the 1-year OIS at elevated levels, dealers said.

 

“We think that these are good levels to receive fixed rates in the 1-year OIS,” a dealer at a private bank said. “Offshore players are dominant in the market and they have a different view about the rate hikes, keeping the levels elevated.”  

 

Trade volumes were dismal across maturities as traders stayed on the sidelines ahead of the US CPI data release, due later today, and then India CPI data release, due after market hours on Monday.

 

The US inflation data is likely to lend cues to the Federal Reserve ahead of its meeting outcome on Wednesday.

 

India’s retail inflation rate based on CPI (Combined) is likely to moderate to 7.1% in May from a near eight-year high of 7.79% in April, mainly on account of a favourable base effect, according to the median of a poll of 19 economists.

 

OUTLOOK

Swap rates are not traded on Saturdays.

 

On Monday, swaps are seen taking cues from the US CPI data, due after market hours today, ahead of the Federal Open Market Committee meeting next week.

 

Traders may avoid placing large bets due to caution before the release of India CPI data, due after market hours on Monday.

 

India’s retail inflation rate based on CPI (Combined) is likely to moderate to 7.1% in May from a near eight-year high of 7.79% in April, mainly on account of a favourable base effect, according to the median of a poll of 19 economists.

 

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 6.10-6.40%, and the five-year at 6.95-7.20%.

 

 

At 1530 IST

Thursday

1-year OIS

6.25%

6.23%

2-year OIS

6.73%

6.71%

5-year OIS

7.17%

7.12%

2-year MIFOR

6.35-6.50%6.49-6.56%

5-year MIFOR

6.73-6.88%6.79-6.94%

 

 

End

US$1 = 77.83 rupees

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

 

Edited by Arshad Hussain

 

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.

 

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Send comments to [email protected]

 

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

Source: Cogencis

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