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India IRS Review: Rise in dull trade as US yields, crude surge

Informist, Monday, Dec 26, 2022


By Aaryan Khanna


NEW DELHI – Overnight indexed swap rates rose taking cues from a rise in crude oil prices and US Treasury yields, amid thin trade near the end of the year, dealers said.


The one-year swap rate settled at 6.74% against 6.69% on Friday, and the five-year swap rate ended at 6.44%, against the previous close of 6.39%.


The five-year swap rate rose sharply due to overseas traders paying fixed interest rates in the domestic markets as several financial markets around the globe were shut, dealers said.


Financial markets in the US, UK and western Europe were shut today on account of Christmas and associated festivities.


However, domestic traders received fixed rates as the rate view in the long-term segment had not changed, and government bond yields were steady through the day, which capped the rise in the five-year OIS rate, dealers said.


US Treasury yields rose on Friday as personal income rose more than expected in November while inflation data for October was revised upward, strengthening the view that the Fed will continue to hike rates.


The yield on the benchmark 10-year US Treasury note jumped 8 basis points to 3.75% on Friday.


Meanwhile, crude oil prices rose after Russia said it could cut crude output in response to the Group of Seven countries’ decision to put a price cap on Russian exports.


Brent crude future for March delivery was at $84.50 per barrel on Friday against $81.67 per bbl on Thursday.


“The reported levels have jumped, but the actual increase is marginal, and the market is not benchmarking to the volatility because of the lack of volumes throughout the day,” a dealer at a private bank said. “Only the five-year segment had some trading, and that saw at least some receiving from the onshore side.”


At the day’s high, the five-year OIS had risen to 6.48%. 


Other segments saw muted trade of less than 10 bln rupees, with volume hit by foreign banks staying on the sidelines due to the annual closing of accounts at the end of the calendar year, dealers said.


While the one-year OIS rate also rose, the segment had only four trades worth a notional value of 2 bln rupees. The one-year contract was not traded on Nov 19, as traders lacked any domestic cues to trade on for a change in the interest rate view, dealers said.


“Don’t look too much into the one-year swap, it looks to have been a pre-placed deal that was just struck via the exchange,” a dealer at a primary dealership said.



On Tuesday, swap rates are seen opening steady as traders may avoid large bets due to lack of significant cues.


Foreign market participants may keep to the sidelines near the year-end as they close their accounts.


Traders may watch out for any sharp movement in US Treasury yields and crude oil prices at open.


The swap rate in the one-year segment is seen at 6.65-6.80%, and the five-year at 6.30-6.50%.



At 1700 IST


1-year OIS


2-year OIS


5-year OIS


2-year MIFOR


5-year MIFOR





US$1 = 82.65 rupees

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


Edited by Tanima Banerjee



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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Source: Cogencis

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