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Informist, Wednesday, Sept. 23, 2026

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates ended higher Wednesday as near-month Brent crude oil futures returned to $100 per barrel and traders pared bets of a US-Iran peace deal or reopening of the vital Strait of Hormuz, dealers said. Offshore traders likely paid fixed rate contracts, tracking the rise in oil prices, dealers said. 

 

The one-year swap rate ended at 6.10%, up from 6.06% Tuesday. The five-year swap ended at 6.55%, against 6.51% in the previous session. The one-year swap hit a day's high of 6.11%, a level it has tested for two consecutive sessions but failed to rise above. The total notional trading volume on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 458.30 billion Wednesday, down from INR 642.50 billion Tuesday. Brent crude oil futures for delivery in November rose to $100.22 per barrel at 1700 IST from $98.72 per barrel at 0900 IST. 

 

"Crude went back upto $100 (per barrel), so then market lost faith that any deal or resolution would happen. It was just a short-lived relief," a dealer at a private sector bank said. Swaps had fallen the previous session tracking a fall in Brent crude oil prices, on reports that Iran had offered to reopen the Strait of Hormuz subject to conditions. The reports led to traders expecting a resolution to the West Asia war and restoration of oil supply to normalcy. However, that view changed Wednesday, and swaps rose, especially since offshore traders were active on the paid side, dealers said. 

 

"If we see a closing below 50 (6.50% on five-year OIS) then it could go to 43-44 (6.43%-6.44%) but I doubt that will happen," a dealer at a state-owned bank said. "I think OIS is fairly priced right now because people are expecting two hikes this (calendar) year itself." Most traders expect the Reserve Bank of India's Monetary Policy Committee to hike the repo rate by 25 basis points each in October and December, with the one-year OIS pricing in about three hikes of 25 bps each within 12 months.

 

Traders hedged their bond trades in swaps, and await the Centre's borrowing plan for Oct-Mar for further cues. They expect the plan on Friday. Most market participants expect supply of short-term bonds to rise compared to Apr-Sept, which could push swaps maturing in similar tenures higher, dealers said. 

 

OUTLOOK

On Thursday, swap rates are likely to continue tracking overnight movements in crude oil prices and US Treasury yields, dealers said. As the US Fed began its rate hike cycle, the RBI's rate-setting panel is seen following suit with a 25-bps repo rate hike in October, dealers said. Traders will focus on comments by RBI Governor Sanjay Malhotra, dealers said. 

 

Traders also expect the RBI to introduce more measures to drain systemic liquidity, beyond the government bond sales it is conducting this month and variable rate reverse repo operations, they said. Some expect more OMO sales of INR 500 billion or INR 1 trillion. The Centre's borrowing plan for Oct-Mar is also awaited, with the proportion of bond maturities in the plan likely to be an indication of the rate hike cycle and of how the RBI prefers the yield curve to move. Traders expect the announcement on Friday. Traders will also assess the outcome of meetings the central bank is conducting this week on feedback from market participants ahead of the policy decision. The one-year swap rate is seen in the range of 5.95–6.15% and the five-year at 6.40–6.70%.

 

	At 1700 IST	TUESDAY
1-year OIS	6.10%	6.06%
2-year OIS	6.30%	6.26%
5-year OIS	6.55%	6.51%
2-year MIFOR	7.63%	7.58%
5-year MIFOR	7.71%	7.68%

 

End

 

US$1 = INR 95.7400

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

 

Edited by Avishek Dutta

 

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