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India IRS Review: Up; traders pay fixed rates tracking US ylds rise

Informist, Monday, May 8, 2023


By Kasthuri Akhil


MUMBAI – Overnight indexed swap rates ended higher tracking a rise in US Treasury yields. Traders awaited US CPI data for April, due Wednesday, dealers said.


The one-year swap rate settled at 6.63% today, against 6.57% on Thursday. The five-year swap rate ended at 6.03%, against Thursday’s close of 5.95%. Indian money markets were shut on Friday on account of Buddha Purnima.


“6.05% was a hurdle for the five-year swap as it is a technical level. We expect US inflation to come down in April, so the rate should go down to 5.95%,” a dealer at a primary dealership said. 


Traders paid fixed rates today as the yield on the benchmark 10-year US Treasury note rose further by 3 basis points to 3.47% from Friday’s close by the end of the trading session. The yield rose to 3.44% on Friday from 3.37% the previous day as robust jobs data for April  led investors to rethink their bets of rate cuts by the US Federal Reserve as early as July. Perceived risks to financial market stability from US regional banks also ebbed.


Data by the US Labor Department showed that non-farm payrolls rose by 253,000 in April as against a Dow Jones estimate of 180,000 job additions. The unemployment rate also declined to a near 54-year low of 3.4%. With the labour market still tight, investors were wary of betting on a quick pivot from monetary policy tightening by the Fed.


Moreover, St. Louis Fed President James Bullard said a recession was not a base case and a soft landing for the economy was still possible, even as he batted for higher rates to cool down inflation in the US, which remains well above the Fed’s target of a long-term average of 2% annually.


Traders now look forward to the US April inflation data for fresh cues on interest rates, dealers said. Economists polled by Reuters see a rise of 0.4% in April for both the headline and core CPI, with the annual pace of core inflation inching down to 5.5%In March, the headline inflation print rose 5% on year. Meanwhile, core CPI rose 5.6%. 


As traders lacked clarity on the possibility of rate cuts anytime soon, trade volume in contracts of less than one-year tenure remained limited, dealers said. “Traders may stay on sidelines without any major change in their trade positions unless the US and India CPI prints give any new indications,” a dealer at a private bank said. 


India’s inflation data for April is due for release on Friday. India’s March CPI print was 5.66%, down from 6.44% the previous month.



On Tuesday, swap rates are seen opening steady due to lack of significant cues ahead of the US inflation print release on Wednesday, dealers said.


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 6.57-6.68%, and the five-year at 5.90-6.10%.



At 1700 IST


1-year OIS


2-year OIS


5-year OIS


2-year MIFOR

6.56- 6.68% 6.57-6.69% 

5-year MIFOR





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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