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India IRS Review: Down as off-shore traders receive fixed rates

Informist, Thursday, Jun 1, 2023


By Nishat Anjum


MUMBAI – Overnight indexed swap rates ended lower today as offshore traders received fixed rates tracking a fall in US Treasury yields, dealers said. US Treasury yields fell as the bill to suspend the US government’s debt ceiling and cap government spending was passed in the House of Representatives by a wide margin.


Rate on five-year swap ended lower, in tandem with US Treasury yields, dealers said.


The movement of the one-year swap rate was minimal throughout the day as the view on domestic interest rates remains unchanged.


Traders widely expect the Monetary Policy Committee of the Reserve Bank of India to keep the repo rate and policy stance unchanged in the upcoming monetary policy review in June.


The one-year swap rate ended flat at 6.57%, while the five-year swap rate ended marginally down at 6.00% against the previous day’s close of 6.03%.


“I have been hearing offshore receiving,” a dealer at a primary dealership said. “Receiving because of expectation that Federal Reserve might not hike rate in June, according to yesterday’s (Wednesday) statement.”


The yield on the benchmark US Treasury yield fell 5 basis points to 3.64% on Wednesday, as US Fed officials said the central bank may skip a rate hike at its Jun 13-14 meeting.


“Skipping a rate hike at a coming meeting would allow the (Federal Open Market) Committee to see more data before making decisions about the extent of additional policy firming,” Fed Governor and Vice Chair nominee Philip Jefferson said.


Federal Reserve Bank of Philadelphia President Patrick Harker said he would also be inclined to skip a hike at the June meeting. “I am in the camp increasingly coming into this meeting thinking that we really should skip,” Harker said.


Now, about 69% of Fed fund futures traders expect the Fed to pause rates in June, against 36% on Wednesday, while the rest expect a 25-bps rate hike, according to CME FedWatch Tool.


“There was offshore buying in gilts, which reflected in swaps today,” a dealer at a private bank said. “However, the fall wasn’t much as compared to the positive momentum in gilts.”

Prices of government bonds rose during the day as expectations of a pause in rates by the Fed in June offset the impact of India’s higher-than-expected GDP growth, dealers said.


According to data released on Wednesday, India’s GDP growth in Jan-Mar was 6.1%, against 4.0% a year ago. A poll by Informist had estimated it at 5.1%. The GDP growth estimate for 2022-23 (Apr-Mar) was revised to 7.2% from 7.0%.



On Friday, swap rates are seen opening steady due to lack of significant domestic cues, dealers said.


Traders will 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 6.52-6.63%, and the five-year at 6.00-6.10%.



At 1700 IST


1-year OIS


2-year OIS


5-year OIS


2-year MIFOR


5-year MIFOR





Edited by Ashish Shirke


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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