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India IRS Review: End off highs as early rise in rates seen overdone

Informist, Tuesday, Jul 19, 2022


By Shubham Rana


NEW DELHI – The overnight indexed swap rates came off highs and ended on a mixed note today, with offshore traders unwinding their paid positions as the early rise in OIS rates was seen overdone, dealers said.


The one-year overnight indexed swap rate settled at 6.37%, flat against Monday. The five-year swap rate ended at 6.57%, against 6.60% the previous day.


Early in the day, traders paid higher fixed rates noting a 5% overnight rise in crude oil prices and an early rise in US Treasury yields, dealers said.


Crude oil futures settled over $5 per barrel higher on Monday as the dollar index came below the 108.00 mark and also as supply remained tight.


The Brent crude contract for September delivery ended at $106.27 per barrel on Monday as against $101.16 per bbl on Friday. The contract traded near the $106 a bbl today.


US Treasury yields traded near the 3.00% mark today after rising to 2.96% on Monday. US yields rose as consumer sentiment saw an uptick and inflation expectation fell on the back of strong economic data in the US.


“The rise in OIS earlier in the day reflected the movement in crude prices and US yields,” a dealer at a primary dealership said. “However later in the day offshore traders received fixed rates as they were of the view that the early rise in rates was overdone.”


Dealers were also of the view that some traders have started taking positions in OIS ahead of the US Federal Open Market Committee meeting next week and the Reserve Bank of India’s Monetary Policy Committee meeting in early August.


While most traders expect the Federal Reserve to hike rates by 75 bps and the RBI to hike rates by 50 bps at their respective policy meetings, the view on the 1-year OIS is split.


Some traders are of the view that the 1-year OIS is overpaid right now, whereas others are of the view that receiving fixed rates at the current levels would be too risky.


“Right now the terminal rate is still being seen at 6.00% so receiving at 6.37% in the 1-year OIS would be too risky considering the volatility in the global factors,” a dealer at a private sector bank said.  



On Wednesday, 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 = 79.94 rupees

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


Edited by Michael Correya



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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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