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India IRS Review: Fall in crude spurs unwinding of paid positions

Informist, Thursday, Jul 21, 2022

 

By Shubham Rana

 

NEW DELHI – Overnight indexed swap rates came off the day’s highs to end largely steady compared to Wednesday’s levels as traders unwound their paid fixed rate positions, noting a fall in crude oil prices, dealers said.

 

The one-year overnight indexed swap rate settled at 6.33%, against 6.35% on Wednesday. The five-year swap rate ended at 6.58%, against 6.56% the previous day.

 

Brent crude oil for September delivery fell over 3% to $102 a barrel today, against $106.92 a bbl on Wednesday, because high US gasoline stockpiles stoked demand worries and returning energy supply from Libya and Russia eased fears of tight supply.

 

Traders avoided placing aggressive bets ahead of the European Central Bank’s interest rate decision later today. “Market will look at commentary on inflation and growth from both the ECB today and Federal Reserve next week, more than the size of the rate hikes,” a dealer at a private bank said.

 

Traders will take look at the interest rate decisions and commentary by central banks globally for cues on what the Reserve Bank of India will do next month at its Monetary Policy Committee meeting.

 

OIS rates are also being affected because of a difference in interest rate view among traders, dealers said. Some traders say the 1-year OIS is overpaid right now, while others are of the view that receiving fixed rates at current levels would be too risky.

 

“There is no long term view in OIS right now and there is also a difference in the overall view,” a dealer at another private bank said. “No one wants to take positions which is leading to such volatility in rates.”

 

OUTLOOK

On Friday, 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. Traders will also keep an eye the European Central Bank’s interest rate decision, due later today, along with commentary on growth and inflation. 

 

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

Wednesday

1-year OIS

6.33%

6.35%

2-year OIS

6.44%

6.45%

5-year OIS

6.58%

6.56%

2-year MIFOR

6.30-6.45%6.32-6.44%

5-year MIFOR

6.61-6.76%6.63-6.75%

 

End

 

US$1 = 79.95 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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© Informist Media Pvt. Ltd. 2022. All rights reserved.

Source: Cogencis

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