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India IRS Review: Fall sharply tracking slump in US ylds; CPI in focus

Tuesday, Jul 12, 2022


By Shubham Rana


NEW DELHI – Overnight indexed swap rates ended sharply lower today, with the 5-year segment falling 13 basis points, as offshore traders received fixed rates noting a sharp decline in US Treasury yields, dealers said.


The one-year overnight indexed swap rate settled at 6.28%, against 6.33% on Monday, while the five-year swap rate fell to 6.59% from its previous close of 6.72%.


Traders unwound their paid positions because US Treasury yields fell ahead of the US CPI data for June, scheduled to be released on Wednesday. The year-on-year CPI is expected to hit a fresh 40-year high of 8.8% in June in the US, according to a Reuters poll, against May’s level of 8.6%.


The yield on the 10-year US Treasury note fell to 2.90% today, against Monday’s closing level of 2.99%.    


A fall in crude oil prices also weighed on swap rates, dealers said. The Brent crude oil contract for September delivery was nearly 2.5% lower at $104.60 a barrel today.


“If you look at OIS rates between 2-year and 5-year tenure, you will see that they are moving towards the 6.50% mark,” a dealer at a foreign bank said. “This means market is pricing in most rate hikes within the next two years, before a long pause.”

While the two-year and the five-year OIS fell sharply, the one-year swap fell only 5 bps, as traders avoided aggressive bets ahead of India’s June CPI data, due later today.


India’s retail inflation is seen at 7.0% in June, compared to 7.04% in May, as duty cuts on several items may offset the impact of rise in prices of food and some other items, according to an Informist poll of 19 economists.


The National Statistical Office is scheduled to release inflation data for June at 1730 IST today.


“The fall in the 1-year OIS was limited as people are still pricing in a 50 bps rate hike in August, even if inflation comes below 7% in June,” a dealer at a private bank said. 



On Wednesday, swaps are seen taking cues from India’s June inflation print, due to be released at 1730 IST today.


India’s retail inflation is seen at 7.0% in June, as against 7.04% in May, as duty cuts on several items may offset the impact of rise in prices of food and some other items, according to an Informist 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 6.10-6.45%, while that in the five-year segment at 6.45-6.70%.



At 1530 IST


1-year OIS



2-year OIS



5-year OIS



2-year MIFOR


5-year MIFOR





US$1 = 79.60 rupees

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


Edited by Aditya Sakorkar


For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.


Cogencis news is now Informist news. 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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Source: Cogencis

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