Informist, Friday, May 20, 2022
By Shubham Rana
NEW DELHI – Overnight indexed swap rates ended up today as offshore traders paid higher fixed rates, noting a rise in crude oil prices, dealers said.
The one-year swap rate settled at 6.21% as against the previous close of 6.17%, while the five-year swap rate closed at 7.04% compared with 6.99% on Thursday.
Crude oil prices settled higher in a volatile session on Thursday due to weakness in the dollar globally and amid expectations China would ease some COVID-19 lockdown restrictions, which could boost demand.
In China, investors are closely watching plans to ease coronavirus curbs from Jun 1 in the most populous city of Shanghai, which could lead to a rebound in oil demand from the world’s top crude oil importer.
The Brent crude oil contract for July delivery closed at $112.04 a barrel on Thursday. Typically, a rise in crude oil prices increases the risk of imported inflation in India and provides less room for Reserve Bank of India to prolong its monetary policy accommodation.
Traders also paid higher fixed rates noting a rise in US Treasury yields, dealers said. The yield on the 10-year benchmark US Treasury note rose nearly 1% today, after a sharp fall on Thursday.
“There was offshore paying in OIS today which pushed domestic rates higher,” a dealer at a primary dealership said. “Right now, the foreign institutional investors are driving most markets and not only equities so we saw a rise in swap rates today.”
Trade volumes remained muted amid a lack of fresh triggers in interest rate swaps after the Monetary Policy Committee meeting’s minutes, released on Wednesday, were largely on expected lines, dealers said.
According to a poll of 16 economists and treasury officials, a majority of participants expect the rate-setting panel to hike repo rate by around 50 basis points at the Jun 6-8 policy meeting and to raise the rate further to 5.15% by August.
OUTLOOK
Swaps are not traded on Saturdays.
On Monday, swap rates are seen opening steady as policymakers’ comments in the latest MPC minutes were on expected lines, and due to lack of further cues on interest rates.
Any sharp movement in crude oil prices and US Treasury yields might lend cues when the market opens.
The swap rate in the one-year segment is seen at 6.00-6.30%, and the five-year at 6.95-7.20%.
End
US$1 = 77.55 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Deepshikha Bhardwaj
Cogencis news is now Informist. 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.
Informist Media Tel +91 (11) 4220-1000
Send comments to [email protected]
© Informist Media Pvt. Ltd. 2022. All rights reserved.
Source: Cogencis
