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India IRS Review: Up as traders pay higher rates on rise in crude

Informist, Monday, Jul 18, 2022


By Shubham Rana


NEW DELHI – The overnight indexed swap rates ended higher today because traders paid higher fixed rates as the Brent crude contract for September delivery rose 2.5% to near the $104-a-barrel mark, dealers said.


The one-year overnight indexed swap rate settled at 6.37%, against 6.35% on Friday. The five-year swap rate ended at 6.60%, against 6.54% the previous day.


“The market view is that as commodity prices come down, rate hike expectations in the US and then in India will come down,” a dealer at a private sector bank said. “But movement in crude remains a big factor.”


Offshore traders paid higher fixed rates in the 5-year OIS as US Treasury yields rose after the opening of European markets, dealers said.


The yield on the 10-year US Treasury note rose 3 basis points to 2.96% today.

The rise in the 1-year OIS was limited as worries of a 100-basis-point rate hike by the US Federal Reserve have eased after Fed officials said they were looking at a 75 bps rate hike later this month instead of a 100 bps move. 


Investors globally had expected the Fed to go for a 100 bps rate hike after US inflation for June came in at 9.1%. Subsequently, Indian investors had moved their rate hike expectations from 25-50 bps to 50-75 bps.


“The rate hike view is clearer now,” a dealer at another private sector bank said. “If the Fed does a 75 bps hike then it is given that RBI will hike by 50 bps.”




On Tuesday, swap rates are seen steady amid lack of significant domestic cues on interest rates.


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


The swap rate in the one-year segment is seen at 6.20-6.55%, and the five-year 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 = 79.97 rupees

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



Edited by Michael Correya



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Source: Cogencis

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