Informist, Friday, Sep 30, 2022
By Aaryan Khanna
NEW DELHI – Overnight indexed swap rates closed steady after the result of Reserve Bank of India’s Monetary Policy Committee meeting was on expected lines, dealers said.
The one-year overnight indexed swap rate settled at 6.91%, flat against Thursday’s close. The five-year swap rate closed at 6.92%, unchanged from the previous day.
The rate-setting panel today hiked its policy repo rate by 50 basis points to 5.90% to rein in rising inflation. This marks the third straight 50-bps hike in policy rate by the central bank and takes total repo rate hike to 190 bps since May.
In an Informist poll prior to the rate decision, 26 out of 30 respondents anticipated a rate hike of exactly 50 basis points.
Moreover, the committee decided to remain focused on withdrawal of accommodation to ensure inflation remains within the target range while supporting growth.
Traders avoided large bets after the rate decision and volumes were limited considering the rate decision as it lent few cues on the future pace of rate hikes, dealers said.
“There was no fresh direction to take from the RBI’s meeting, swaps are already pricing in a fairly high terminal repo rate and this did nothing to dislodge anybody’s punts,” a dealer at a private bank said.
Some OIS rates maturing under one-year fell as traders unwound their paid fixed rates bets taken on caution ahead of the policy outcome, dealers said.
The terminal repo rate remained elevated at 6.75%, same as the pre-policy level, as inflation and growth view remained largely intact, dealers said.
The central bank retained its retail inflation projection at 6.7% for 2022-23 (Apr-Mar), while GDP growth was revised downward by 20 bps to 7%, which was not a drastic cut, dealers said.
During the day, swaps endured some volatility during RBI Governor Shaktikanta Das’s comments at the outcome of the rate-setting panel’s meeting. After digesting the comments, sharp rate movements in swap rates subsided, dealers said.
Traders also avoided drawing cues from overseas triggers during the domestic policy outcome and took little note of US Treasury yields falling during the day, dealers said.
“The policy really had no bearing on the rate cycle,” a dealer at a foreign bank said. “There’s no major market movement, the only volumes were some unwinding of aggressive positioning.”
OIS rates are not traded on Saturday.
On Monday, swap rates may open steady after the September monetary policy decision was on expected lines and due to a lack of fresh triggers on interest rates, dealers said.
The Monetary Policy Committee raised the repo rate by 50 bps, in line with the market’s expectation.
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 6.80-7.10%, and in the five-year segment at 6.80-7.10%.
Edited by Deepshikha Bhardwaj
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