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Thursday, September 29, 2022

India IRS Review: Fall on report RBI may pause rate hikes post Fri

Informist, Thursday, Aug 4, 2022

 

By Shubham Rana

 

NEW DELHI – Overnight indexed swap rates slumped today after Informist exclusively reported that the Reserve Bank of India’s Monetary Policy Committee might pause further rate hikes after the policy decision on Friday. The report said that the central bank won’t try to match the actions of some other central banks such as the US Federal Reserve, and may turn data-dependent. 

 

Today, the one-year overnight indexed swap rate settled at 6.03% as against 6.15% on Wednesday. The five-year swap rate ended at 6.20% as against 6.30% the previous day.

 

“The MPC is likely to stay the course on interest rates and not be swayed by external factors,” a banking industry source told Informist. “The front-loading of policy actions has provided them some breathing space to sit back and watch.”

 

The MPC’s three-day August monetary policy review meeting is underway since Wednesday and the rate decision will be announced on Friday.

 

Traders received fixed rates today, as they shifted their rate hike view to 25-35 basis points from the earlier expectation of 35-50 bps.

 

“This news today has completely changed the market view,” a dealer at a private bank said. “Some people are now expecting a 25-bps hike on Friday and then no more rate hikes.”

 

In a poll by Informist, all 30 respondents expected the rate-setting panel to hike the repo rate, but the divide on the quantum was clearly visible. While a dozen respondents expected the repo rate to be hiked exactly by 50 bps, 11 saw a hike of 35 bps, two of 25 bps, and one of 40 bps. The remaining four respondents gave a range for the hike–two saw a hike of 35-50 bps, while the other two expected a hike of 25-35 bps and 40-50 bps, respectively. 

 

Quoting a banking source, Informist also exclusively reported that the RBI may stand firm on its growth and inflation projections for 2022-23 (Apr-Mar).

 

“On Friday, inflation and growth projections, and the commentary going ahead on rate hikes will also be very important, maybe just as important as the rate hike itself,” a dealer at a primary dealership said.

 

OUTLOOK

On Friday, swap rates are seen steady due to caution before the outcome of the Monetary Policy Committee’s meeting at 1000 IST.

 

During the day, traders will take cues from commentary on the path of future rate hikes, dealers said.

 

In a poll by Informist, all 30 respondents expected the rate-setting panel to hike the repo rate, but the divide on the quantum was clearly visible. While a dozen respondents expected the repo rate to be hiked exactly by 50 bps, 11 saw a hike of 35 bps, two of 25 bps, and one of 40 bps. The other four respondents gave a range for the hike–two saw a hike of 35-50 bps, while the other two expected a hike of 25-35 bps and 40-50 bps, respectively.  

 

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

 

The swap rate in the one-year segment is seen at 5.90-6.25%, and the five-year segment at 6.10-6.35%.

 

 

At 1530 IST

Wednesday

1-year OIS

6.03%

6.15%

2-year OIS

6.06%

6.19%

5-year OIS

6.20%

6.30%

2-year MIFOR

6.08-6.20%6.03-6.18%

5-year MIFOR

6.41-6.53%6.39-6.54%

 

 

End

US$1 = 79.46 rupees

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

 

Edited by Namrata Rao

 

 

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.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to [email protected]

 

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

 

Source: Cogencis

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