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Friday, September 30, 2022

India IRS Review: Jump on view sharp US Fed rate hikes to persist

Informist, Thursday, Sep 22, 2022


By Shubham Rana


NEW DELHI – Overnight indexed swap rates ended sharply higher today after the US Federal Reserve raised rates by 75 basis points on Wednesday and signalled further sharp rate hikes will follow, dealers said.


The one-year overnight indexed swap rate settled at 6.89% as against 6.73% on Wednesday. The five-year swap rate closed at 6.89% against 6.71% the previous day. In fact, the one-year, two-year and the five-year swap rates all ended at 6.89%.


Offshore traders paid higher fixed rates on the view that the Fed would continue to hike rates sharply till the end of the year. US Fed officials project the terminal rate at 4.25-4.50%, 100 bps higher than the previous estimate from June, implying another 125 bps of rate hikes over two policies.


Moreover, domestic traders, who had received fixed rates over the past week in the face of overseas paying, unwound their received fixed rate bets, dealers said.


The Reserve Bank of India’s Monetary Policy Committee is now seen raising the repo rate by 50 bps at its policy review next week. Moreover, the domestic terminal repo rate is now expected to rise from the 6.00-6.25% levels seen earlier as US rate hikes may put pressure on RBI to tighten monetary policy, dealers said.


“We expected some weakness from the morning levels since terminal rate expectations are going up,” a dealer at a primary dealership said. “There is a significant unwinding of onshore receiving after their bets have gone sour after the Fed.”


Since Sep 12, the one-year OIS rate has risen 60 bps, and the five-year rate is up 55 bps, largely on offshore paying on US Fed rate hike view, dealers said.



Swap rates are seen opening higher on Friday after the Fed hiked interest rates by 75 bps and said more sharp rate hikes will follow this year.


Traders will now turn their attention to the RBI’s policy review next week, where the Monetary Policy Committee is expected to hike rates by 50 bps, dealers said.


Any movement in US Treasury yields and crude oil prices may also lend cues at open.


The swap rate in the one-year segment is seen at 6.70-6.95%, and in the five-year segment at 6.75-7.00%.



At 1530 IST


1-year OIS



2-year OIS



5-year OIS



2-year MIFOR


5-year MIFOR





US$1 = 80.86 rupees

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


Edited by Ashish Shirke


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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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