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Informist, Monday, Oct. 5, 2026

 

By Janwee Prajapati

 

MUMBAI – Overnight indexed swap rates ended steady in thin trade Monday on caution ahead of the Reserve Bank of India's Monetary Policy Committee's decision, due Wednesday, dealers said. Intraday rise in Brent crude oil prices and US Treasury yields also soured sentiment, dealers said. 

 

"There is nothing much happening today, volumes are very low... everybody is waiting for the commentary from the Governor (RBI's)," a dealer at a private sector bank said. "At 6.26%, around four to five rate hikes are being priced in at the one-year OIS rates."  

 

The one-year swap rate ended at 6.26%, one basis point lower from 6.27% Thursday. The five-year swap rate closed at 6.69% against 6.73% Thursday as traders likely unwound their earlier positions when they paid fixed rates. Trade volume remained low Monday as traders refrained from placing aggressive bets ahead of the RBI's MPC meeting outcome Wednesday, dealers said. Total notional trading volume on Clearing Corp. of India's derivatives trading platform was INR 386.90 billion Monday, down from INR 480.65 billion Thursday. Most of the trading volume was recorded only because of the movement in Brent crude oil prices, dealers said. Some dealers said there were only domestic participants placing intraday bets.

 

The Brent crude futures contract for December delivery was at $102.67 per barrel, up from the day's low of $100.65 per barrel and from $99.91 per barrel at the end of Indian trading hours Thursday. The yield on the 10-year benchmark US Treasury note was at 5.28%, up from 5.26% at 0900 IST but down from 5.31% at 1700 IST Thursday. 

Traders widely expect the Monetary Policy Committee to raise the repo rate by 25 bps while keeping its stance unchanged. Some traders also expect a 50-basis-point hike, which will likely pull up swap rates, dealers said. However, the focus will be on RBI Governor Sanjay Malhotra's comments and forward guidance, dealers said. Some traders expect the governor to also announce bond sales through open-market operation auctions worth INR 500 billion to INR 1 trillion to absorb excess liquidity from the banking system. Though unlikely, traders have not pared their bets on a 50% rise in repo rate in October MPC meeting. Some traders expect the terminal repo rate to be near 6% while others expect it to be 6.25%.

 

"If there is no rate hike on Wednesday (at the MPC meeting), the five-year swap rate could fall to 6.62%-6.63%," a dealer at a primary dealership said. "Twenty-five basis points (rise in repo rate in October MPC) are already priced-in and if there is no stance change then we might only see momentary moves."

 

Traders will also await India's CPI inflation data for September, to be released Oct. 12, which is likely to influence further decisions on the repo rate path, dealers said.  

 

OUTLOOK

On Tuesday, swap rates will take cues from movements in crude oil prices and US Treasury yields and developments in the war in West Asia, dealers said.

 

The next significant domestic rate trigger is the MPC's rate decision, they said. As the US Federal Reserve hiked interest rates in September, the RBI's rate-setting panel is seen following suit with a 25-bps repo rate hike, dealers said. Inflation readings are rising, while growth indicators show resilience, strengthening the case for repo rate increases. A quarter-percentage-point rate hike is already factored into OIS rates and a lack of further policy tightening will lead to a fall in swap rates, they said.

 

For direction, traders will focus on comments by the RBI Governor Sanjay Malhotra after the policy decision. Traders expect the central bank to introduce more measures to drain systemic liquidity beyond the government bond sales it conducted this month and variable rate reverse repo operations, dealers said. Some expect more open-market operations sales of up to INR 1 trillion in October, while others expect a hike in banks' cash reserve ratio. The one-year swap rate is seen in the range of 5.95–6.35% and the five-year at 6.55–6.90%.

 

	At 1700 IST	THURSDAY
1-year OIS	6.26%	6.27%
2-year OIS	6.45%	6.47%
5-year OIS	6.69%	6.73%
2-year MIFOR	7.72%	7.73%
5-year MIFOR	7.72%	7.72%

 

End

 

US$1 = INR 96.32

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

 

Edited by Deepshikha Bhardwaj

 

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