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India IRS Review: Little changed on caution ahead of India Jan CPI

Informist, Monday, Feb 12, 2024


By Nishat Anjum


MUMBAI – Overnight indexed swap rates ended little changed as traders refrained from placing aggressive bets on caution ahead of India January CPI data, due at 1730 IST today, dealers said.


The one-year swap rate settled at 6.69%, against 6.70% on Friday. The five-year swap rate ended at 6.30%, against 6.31% on the previous trading day.


“There was some intraday movement because of US yields, but (the movement) was very limited,” a dealer at a primary dealership said. “Ahead of the inflation data, there is some caution, though US data will likely have more importance.” US January CPI data is scheduled to be released on Tuesday, after Indian market hours. According to a Dow Jones poll, inflation for last month in the world’s largest economy is expected at 2.9% on year, as against 3.4% in December.


Yield on the 10-year benchmark US Treasury note fell to 4.16%, from the day’s high of 4.19%. Some traders received fixed rates tracking the intraday fall in US Treasury yields, dealers said.


Meanwhile, India’s annual inflation rate based on CPI likely moderated to a three-month low of 5.1% in January from 5.69% in December, mainly on account of the statistical effect of a high base, according to an Informist poll. The headline inflation rate was 6.52% in January last year. 



The base effect is such that even if the overall index remains unchanged in January from the previous month, CPI inflation will ease to 5.2%. Along with the favourable base effect, a fall in vegetable prices in January is also expected to have helped in moderating retail inflation, economists said. 


Core inflation, which excludes volatile items like food and fuel, is expected to stay below the 4% mark in January as well. Core inflation fell to 3.9% in December. This was the first sub-4% core inflation print since December 2019.


Getting inflation to the target of 4% on a sustainable basis has been a key objective of monetary policy as repeated by the rate-setting panel’s members on multiple occasions. In his statement on Thursday, Reserve Bank of India Governor Shaktikanta Das said the job is not yet finished, and we need to be vigilant about new supply shocks that may undo the progress made so far.


As of now, the swap rates factor in a 25-basis-point rate cut in August, dealers said. Meanwhile, a major part of the market now sees rate cuts by the Monetary Policy Committee in Oct-Dec, as against Jul-Sep earlier. In its recent policy review meeting this month, the MPC kept the policy rate unchanged at 6.50%, with a vote of 5-1. External member Jayanth Varma voted for a rate cut.


The market expects the money market overnight rates to move towards the repo rate of 6.50%, before the actual cuts by the rate-setting panel, dealers said. Today, the overnight Mumbai Interbank Offer Rate–the floating leg of the OIS contract–was pegged at 6.85%.



On Tuesday, swap rates may open steady as traders may avoid aggressive bets on caution ahead of the US January CPI, due after market hours, dealers said. Swap rates may also take cues from the domestic CPI data for January, due after market hours today.


A sharp movement in US Treasury yields or crude oil prices may also lend cues at the opening. The swap rate in the one-year segment is seen at 6.60-6.75% and in the five-year segment at 6.20-6.35%.



At 1700 IST


1-year OIS


2-year OIS


5-year OIS


2-year MIFOR


5-year MIFOR





Edited by Akul Nishant Akhoury


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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© Informist Media Pvt. Ltd. 2024. All rights reserved.

Source: Cogencis

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