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

Informist, Thursday, Jul 20, 2023


By Kasthuri Akhil


NEW DELHI – Overnight indexed swap rates ended higher as traders paid fixed rates, tracking a rise in US Treasury yields. However, traders avoided placing aggressive bets due to caution ahead of the release of US jobless claims report, due after market hours today, dealers said.


The one-year swap rate settled at 6.79%, against 6.77% on Wednesday, while the five-year swap rate closed at 6.30%, compared with 6.26% the previous day.


The yield on the 10-year benchmark 10-year US Treasury note rose to 3.80% from 3.76% at the end of Indian market hours on Wednesday. US yields rose largely towards the close of the Indian market as investors gauged the state of the economy and looked ahead to fresh data, including on weekly initial jobless claims, which may guide the US Federal Reserve’s policy decision on Jul 26.


According to the CME’s FedWatch tool, a whopping 99.8% of Fed fund futures traders expect the US rate-setting panel to hike the federal funds rate by 25 bps next week.


Some dealers attributed the rise in the five-year contract to bond-swap trades, wherein traders paid fixed rates in the five-year OIS rate and stepped up purchases of the bond of similar maturity, as they expected the spread between the swap rate and the bond’s yield to contract. Today, the five-year 7.06%, 2028 bond ended at 99.98 rupees or 7.06% yield.

“Despite US yield being at the same level for most of the day, There was paying which could be for bond-swaps,” a dealer at a primary dealership said. “But mostly people have an interest in it when the five-year OIS and bond’s spread is of about 100 basis points, it doesn’t seem so lucrative now.”


Some dealers also said traders paid fixed rates in the five-year swap rate and received in the one- and two-year contracts, which contributed to the rise in the five-year swap rate. However, the five-year segment failed to rise beyond 6.30% as some traders started to receive fixed rates as it neared the technically key level.


Moreover, dealers speculated that traders paid fixed rates in the OIS market to protect their underlying liability under the bond-forward-rate agreement. “I have been hearing since morning that it has been FRA (forward-rate agreement) deal, but in my opinion they usually pay on the day of auction and not one day before. Swap rates look driven by offshore trades, can’t see a domestic cue for it.”



On Friday, swap rates may open steady due to lack of fresh cues in the market on domestic interest rates, 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 6.65-6.90%, and the five-year at 6.20-6.40%.



At 1700 IST


1-year OIS


2-year OIS


5-year OIS


2-year MIFOR


5-year MIFOR





Edited by Avishek Dutta


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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