More Stories

Informist, Wednesday, Jul. 1, 2026

By Cassandra Carvalho

MUMBAI – Overnight indexed swap rates ended higher Wednesday tracking a rise in US Treasury yields after economic data released in the world's largest economy indicated strength in its labour market, reinforcing bets of a rate hike by the US Federal Open Market Committee by the end of 2026, dealers said. 

The one-year swap rate closed at 5.79% against 5.76% Tuesday. The five-year swap rate ended at 6.22%, up from 6.18% Tuesday. The total notional trading volume reported on Clearing Corp. of India Ltd.'s derivatives trading platform fell to INR 294.55 billion Wednesday from INR 515.00 billion Tuesday.

"We've risen because of the data release, US yields have gone up, onshore is paying because of that," a dealer at a private sector bank said. "We're seeing some paying interest at these levels because for two-, three- months we've seen a fall in OIS."

The yield on the 10-year US Treasury note rose to 4.48% at 1700 IST, up from 4.39% at the end of swap market hours Tuesday, after the Job Openings and Labor Turnover Survey showed job openings rose more than expected to 7.59 million as of May 31, above consensus estimates of 7.30 million. Swaps tracked the rise in US yields, though swaps are still largely pricing out a rate hike in India in August or October, dealers said. Fed fund futures are pricing in 40% chance of a 25-basis point rate hike by the US Federal Open Market Committee by end of 2026, according to the CME FedWatch tool. 

Swap traders are not pricing in a rate hike by the Reserve Bank of India's Monetary Policy Committee in 2026 as aggressively as the US is, dealers said. Moreover, the rise in swaps has just been a technical rebound after 15-week lows hit last week, they said. The five-year OIS had tested its 200-day moving average of about 6.15% Thursday. Since then, the rate has risen but not as high as its next upward technical level of 6.25%.

"I don't think five-year (OIS) will touch 25 (6.25%), we will just be here only for a bit, until there's some strong push to move it on either side," a dealer at another private sector bank said. Some dealers expect the swap rate to fall further to about 6.06%, they said. 

OUTLOOK

Thursday, swap rates are seen tracking US Treasury yields and comments from US Federal Reserve Chair Kevin Warsh, who will speak at an event hosted by the European Central Bank in Sintra, Portugal, at 1830 IST. Swaps may also track crude oil prices, though traders have priced in Brent crude oil prices at about $72 a barrel, they said. 

Deficient rainfall and higher food prices are expected to push up retail inflation in the coming months, while the RBI is likely to drain systemic liquidity ahead of a likely rate hike cycle, dealers said. Though most traders no longer expect a repo rate hike in August or October, they are wary of a US Federal Open Market Committee rate hike that could sharply change expectations for domestic rates, dealers said.

The movement of the rupee could also lend cues Thursday. The one-year swap rate is seen at 5.60-5.90% and the five-year at 6.10-6.30%. 

End

US$1 = INR 95.25

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

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.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2026. All rights reserved.