Informist, Wednesday, Dec 7, 2022
By Nishat Anjum
MUMBAI – Overnight indexed swap rates jumped today as the Reserve Bank of India’s Monetary Policy Committee retained its withdrawal of accommodation stance, dealers said.
The 1-year swap rate settled at 6.70% against 6.61% on Tuesday. The 5-year swap rate ended at 6.36%, against the previous day’s close of 6.30%.
Dealers were of the view that the unchanged stance by the central bank suggested that more rate hikes may be on the cards, dealers said.
“Even though the market was largely expecting a hike of 35 basis points, the committee’s unexpected hawkish stance led to the paying in the overnight market,” a dealer at a private bank said. “The market now is expecting a rate hike in the future.”
Today, the rate-setting panel hiked repo rate by 35 bps to 6.25%. While most traders now expect the policy committee to hike rates by another 25 bps in February, some are of the view that the terminal repo rate can exceed the 6.50% mark.
Swap rates came off the day’s highs as US Treasury yields and crude oil prices fell, dealers said.
“The five-year OIS went up till 6.43% but closed at 6.36% as receiving interest started to come in following the fall in crude oil prices,” a dealer at a private bank said.
Brent crude oil prices were close to their lowest levels since January, on growing fear of global recession. The February delivery contract fell to $77.74 per barrel, against Tuesday’s close of $79.35 per bbl and $82.66 per bbl on Monday.
The yield on the 10-year US Treasury note was at 3.53% at the close of Indian market hours today, as compared to 3.55% in early trade.
Traders now await the Federal Open Market Committee meeting and the US November CPI data, both scheduled next week, dealers said.
Federal Reserve’s policy committee is scheduled to meet on Dec 13-14. The Fed has increased interest rates by 375 basis points so far in 2022; the most recent four rate increases were each of 75 bps. The Fed is expected to hike rates by 50 bps.
Today, the RBI also restored the rupee interest rate derivatives market hours from 0900-1700 IST, effective Monday.
Dealers said that the increase in timings is unlikely to have a big impact on the operations and the market at large.
OUTLOOK
On Thursday, swap rates are seen higher as the market expects the RBI to continue with more rate hikes in its fight to control inflation, dealers said.
Traders may watch out for any sharp movement in the US Treasury yields and crude oil prices at open.
The swap rate in the one-year segment is seen at 6.60-6.75%, and the five-year at 6.30-6.45%.
End
US$1 = 82.47 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Maheswaran Parameswaran
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