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Informist, Thursday, Jul. 2, 2026

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates ended steady Thursday, as a rise in US Treasury yields offset a slight fall in swaps on tracking an appreciation of the rupee against the dollar earlier in the session, dealers said. Traders were cautious ahead of the release of non-farm payrolls data in the US, they said. Moreover, dealers preferred trading in the bond market, as bond yields have more scope for a fall than swap rates, they said. 

 

The one-year swap rate closed at 5.79%, the same as Wednesday. The five-year swap rate ended at 6.20%, down from 6.22% Wednesday. The total notional trading volume reported on Clearing Corp. of India Ltd.'s derivatives trading platform fell to INR 233.15 billion Thursday from INR 294.55 billion Wednesday. The yield on the 10-year US Treasury note was 4.50% at 1700 IST, compared with 4.48% at the same time the previous session. 

 

"We have to look at where NFP (non-farm payrolls) comes, the Bloomberg forecast is saying it will be on the higher side. If US 10-year (US yield) goes 10-12 bps up to 62 (4.62% yield) we will definitely see some impact (paying) in our market," a dealer at an insurance company said. The yield spread between the two countries' 10-year benchmarks has already narrowed, the dealer said. Some dealers said the 4.52% yield on the 10-year US Treasury note is a technical level which could prevent an upside. 

 

Swaps traded slightly lower earlier in the day tracking the appreciation of the rupee against the dollar after the local unit had fallen for three consecutive sessions, dealers said. An ease in Brent crude oil prices to $70 per barrel from $72 Wednesday aided the fall in swaps. However, the rupee still ended the session lower, and elevated US yields led to swaps recovering the fall. The focus was on whether the US employment report for June would reinforce bets of a rate hike by the US Federal Open Market Committee in 2026, after other data recently has done so, dealers said. A rate hike in the US would hasten the onset of a rate hike cycle in India, to protect the interest rate differential between the two countries. Other than this offshore trigger, swap traders are largely pricing out rate hikes by the Reserve Bank of India's Monetary Policy Committee in August or October, reducing the bias in paying fixed rate contracts. 

 

"No one is seeing a pay right now, but swaps have already rallied (fallen) a lot, while G-sec (yield) has more scope (to fall) right now, the action in OIS is kind of done for now," a dealer at a private sector bank said. This also led to low volumes in swaps Thursday. The 10-year benchmark government bond yield fell nearly four basis points Thursday, while both the one-year and five-year OIS rates ended steady. 

 

OUTLOOK

Friday, swap rates are seen tracking US Treasury yields after the release of non-farm payrolls data in the US. Non-farm payrolls rose by 57,000 on month in June in the US, lower than a Wall Street Journal poll estimate of 115,000. US yields fell after the release. Jobless claims for the week ended Saturday fell by 1,000 to 215,000, lower than a poll estimate of 220,000. 

 

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. However, no rate hike is expected until October after assessing recent commentary from RBI officials, dealers said. 

 

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

 

	At 1700 IST	WEDNESDAY
1-year OIS	5.79%	5.79%
2-year OIS	5.93%	5.93%
5-year OIS	6.20%	6.22%
2-year MIFOR	6.75%	6.73%
5-year MIFOR	6.98%	6.94%

 

End

 

US$1 = INR 95.3925

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

 

Edited by Deepshikha Bhardwaj

 

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