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India IRS Review: Rates flat; traders unwind received bets in 5-year

Informist, Friday, Jun 2, 2023


By Anjali


NEW DELHI – Overnight indexed swap rates ended largely unchanged today because traders unwound their received fixed bets as the five-year swap rate touched 5.96%, dealers said. Swap rates had fallen earlier in the day tracking an overnight fall in US Treasury yields. 


“There was receiving earlier because of US yields,” said a dealer at a primary dealership. “Then people paid at 5.96% (5-year swap) to book profit.” 


The one-year swap rate ended at 6.56%, against 6.57% on Thursday. The five-year swap rate ended flat at 6.00%.


Some traders unwound their received bets on caution ahead of US non-farm payroll data scheduled later in the day, dealers said. Dealers speculated that a few traders paid fixed bets in two-year and three-year swaps in order to protect their underlying investments.


Some traders sold the 7.38%, 2027 government bond and paid in five-year swap rate to protect their underlying investments.


“The five-year got paid because of the movement in g-sec today, the fall couldn’t sustain,” said a dealer with a private bank. “There are also no trading views right now, the 6.00-6.05% range is holding strong because your rate view is entirely stuck.”


The movement of the one-year swap 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 at the upcoming monetary policy review in June.


US Treasury yields fell on Thursday as data showed contraction in manufacturing activity and lower labour costs, leading to speculation that the US Federal Reserve will keep policy rates unchanged at its upcoming meeting.


Data from the Institute for Supply Management on Thursday showed that US manufacturing Purchasing Managers’ Index fell to 46.9 in May from 47.1 in April. Economists polled by Reuters saw the index dipping to 47.0 in May. The PMI stayed below the 50 threshold for the seventh straight month, indicating contraction in manufacturing. This is the longest contraction seen since the Great Recession.


Further, the US Labor Department said on Thursday that initial claims for state unemployment benefits rose by 2,000 to a seasonally-adjusted 232,000 in the week ended May 27.


Consequently, over 70% of market participants now expect the Federal Reserve to keep rates unchanged at 5.00-5.25% at its June policy meet, according to the CME group’s FedWatch tool.



Swaps are not traded on Saturdays. On Monday, 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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