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Informist, Friday, Jul. 17, 2026

 

By Aaryan Khanna

 

NEW DELHI – Overnight indexed swap rates ended higher Friday, largely due to foreign banks and offshore traders paying fixed rates late in the day, dealers said. Trade volumes fell due to lack of significant domestic or global cues on interest rates, they said. 

 

The one-year swap rate closed at 5.93%, up from 5.89% Thursday. The five-year swap rate ended at 6.38%, also higher than 6.34% Thursday. The total notional trading volume reported on Clearing Corp. of India Ltd.'s derivatives trading platform fell to INR 316.25 billion Friday from INR 504.85 billion Thursday. 

 

"It is a mystery why offshore traders are so aggressive on the paying side now, swinging completely from last week," a dealer at a primary dealership said. "Even though US yields have come down by 10 basis points, which is a material change, they are not concerned and continuously hitting the market."

 

The 10-year US Treasury yield had risen to an eight-week high of 4.64?rlier this week, but fell to 4.52% by 1700 IST Friday. Some of the offshore participants were wary of an escalation in hostilities in West Asia over the weekend, dealers said. These traders also tend to highly correlate crude oil prices with India's inflation trajectory and may be wary of receiving fixed rates with Brent crude futures sustaining near $85 a barrel.

 

Traders who had paid fixed rates near the multi-month low of 6.10% hit on the five-year swap rate last week were booking profits as OIS rates rose, dealers said. This has been limiting the rise in the five-year swap rate beyond 6.40%, they said.

 

Meanwhile, the view on the domestic interest rate trajectory was largely unchanged, despite OIS rates rising, dealers said. Traders expect the first rate hike in October with a total of 75 bps of repo rate increases in the next 12 months from the current 5.25%.

 

"A day like today (Friday) really is not meant to show any rate views in OIS," a dealer at a private sector bank said. "It is all a matter of flows, which hit at the wrong time and the market didn't have the appetite to receive into the weekend."

 

OUTLOOK

Swaps are not traded Saturdays. On Monday, swap rates will track movements in crude oil prices and US Treasury yields, dealers said. Offshore traders are likely to continue paying fixed rate contracts if the conflict in West Asia persists. The developments in West Asia will also influence traders' views on domestic rate increases due to the potential impact on imported inflation.

 

The one-year swap rate is roughly pricing in nearly three rate hikes in the repo rate within 12 months. Traders will also keep a track of any received bets by domestic banks' asset and liability management, with flows from these desks having hit a pause this week amid a rise in crude oil prices. Traders will also track foreign inflows through the various schemes the RBI rolled out last month to shore up capital. Some traders expect inflows of around $20 billion by the first week of August. 

 

The movement in the rupee could also lend cues. The one-year swap rate is seen in the range of 5.78-6.10% and the five-year at 6.25-6.45%.

 

	At 1700 IST	THURSDAY
1-year OIS	5.93%	5.89%
2-year OIS	6.09%	6.07%
5-year OIS	6.38%	6.34%
2-year MIFOR	6.89%	6.86%
5-year MIFOR	7.08%	7.06%

 

End

 

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

 

Edited by Avishek Dutta

 

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