Home Commodity Market News India IRS Review: Rise tracking US Treasury yields in dull trade

India IRS Review: Rise tracking US Treasury yields in dull trade


Informist, Monday, Oct 31, 2022


By Aaryan Khanna and Shubham Rana


MUMBAI – Overnight indexed swap rates ended higher today tracking rise in US Treasury yields. Volume was low as market participants are waiting for cues from policy meetings in the US and India, dealers said.


The one-year overnight indexed swap rate settled at 7.01% against 6.95% on Friday. The five-year swap rate closed at 6.92% compared with 6.86% the previous day.


“We are caught between making decisions without having full information, so the market has not traded,” a dealer at a foreign bank said.


Trade volume of the two-year swap topped that of the one-year, which is rare and a clear indication that traders are placing bets on the US Federal Reserve’s policy statement, dealers said.


With the Fed’s preferred measure of inflation showing that price rise remains sticky, a move towards slower rate hikes may not come, dealers said.


For the fourth consecutive meeting, the Fed is widely expected to raise rates by 75 basis points this week, but traders will focus on the commentary of Fed officials on the path of rate action moving ahead, dealers said.


The 10-year US Treasury yield jumped 6 basis points on Friday to 4.02% and rose further to 4.07% today.


On the domestic front, traders are cautious ahead of the off-cycle Monetary Policy Committee meeting on Thursday, dealers said.


Though the MPC is meeting under Section 45ZN of the Reserve Bank of India Act, 1934, which pertains to the report to the government on failure to meet the inflation targeting mandate, traders are wary of a potential rate hike, dealers said.


“Everybody knows that there will be no rate hike on Thursday but no one wants to take even a slight chance,” said a dealer at a private bank.



On Tuesday, swap rates may open steady due to lack of domestic cues on interest rates.


Traders may stay on the sidelines on caution ahead of the US FOMC meeting outcome after market hours on Wednesday and the MPC meeting on Thursday.


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


The swap rate in the one-year segment is seen at 6.85-7.10%, and in the five-year segment at 6.80-7.05%.



At 1530 IST


1-year OIS



2-year OIS



5-year OIS



2-year MIFOR


5-year MIFOR





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


Edited by Ashish Shirke


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