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India IRS Review: Up tracking rise in US yields after mixed jobs data

Informist, Monday, Sep 4, 2023


MUMBAI – Overnight indexed swap rates ended higher today as traders paid fixed rates tracking a rise in US Treasury yields, with a trading holiday in the US pushing up trading interest in domestic swaps, dealers said.


The one-year swap rate settled at 7.01%, against 6.97% on Friday. The five-year swap rate ended at 6.67%, against 6.56% the previous day of trade.


The yield on the benchmark 10-year US Treasury note settled at 4.18% on Friday, compared with 4.11% at the end of Indian market hours. US yields rose after inconclusive data and also as traders booked profits ahead of the Labor Day holiday today.


Rise in the US unemployment rate to 3.8% in August from 3.5% in July suggests the US Federal Reserve may hold off on further rate hikes as the impact of previous monetary tightening plays out in the economy. However, the US economy added 187,000 jobs in August, more than the consensus estimate, indicating the labour market was still tight.


Traders attributed the paid fixed rate bets to offshore traders, particularly as trade volume rose after two lacklustre days, dealers said.


“Offshore traders have returned on the paying side very aggressively over the last two-three sessions,” a trader at a mutual fund said.  


Domestic concerns on the inflation print in August kept traders keen to pay fixed rates, and expectations of liquidity remaining tight also pushed short-term rates higher, dealers said.


On the global front, rising crude oil prices also posed a threat to the domestic inflation outlook. The rise in crude has prompted hedge funds from south-east Asia to pay fixed rates in swaps, dealers said.


On Friday, Brent crude oil for November delivery rose 2% to $88.55 a barrel, and was steady through Indian market hours today, as crude prices hit their highest levels in seven months on supply concerns. 


“There are oil-based payers in the market, which has come out to be one of the more interesting cases of recent times,” a dealer at a primary dealership said. “They are only there when (Brent) crude goes above $85 (a bbl).”


However, the domestic rate view remains that of the repo rate being maintained at 6.50% until at least June next year, with consistent bets only after October 2024, dealers said.



On Tuesday, swap rates are seen opening steady due to a lack of significant domestic cues on interest rates, dealers said.


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


The swap rate in the one-year segment is seen at 6.90-7.10% and in the five-year segment at 6.50-6.70%.



At 1700 IST


1-year OIS


2-year OIS


5-year OIS


2-year MIFOR


5-year MIFOR





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


Edited by Manisha Baxla


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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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