India IRS Review: Little changed in dull trade; 5-yr swap off lows

India IRS Review: Little changed in dull trade; 5-yr swap off lows

Informist, Tuesday, Oct 17, 2023


NEW DELHI – Overnight indexed swap rates ended little changed in thin trade, with the five-year swap ending off lows due to a rise in US Treasury yields and crude oil prices during the day, dealers said.


The one-year swap rate settled at 6.97%, against 6.98% at close on Monday. The five-year swap rate ended at 6.71%, against 6.70% the previous day.


The yield on the benchmark 10-year US Treasury note rose to 4.76% at the time of the Indian market close from 4.69% on Monday, ahead of retail sales data for September scheduled after market hours. US yields were also influenced by increased debt supply from the US government, including a slew of Treasury bills and bonds this week worth a cumulative $253 bln.


Meanwhile, the docket of US Fed speakers after market hours today included John Williams and Michelle Bowman, and Federal Open Market Committee voting member Thomas Barkin at 2015 IST.


Foreign investors were earlier speculated to be receiving fixed interest rates, likely on the view that India's rate hike cycle is at an end and the Monetary Policy Committee would not hike the repo rate beyond 6.50% despite external pressures on the rupee. Easing inflation also attracted foreign investors to the Indian market, dealers said. 


"That's the only segment where trading is happening," a dealer at a private bank said. "Most of it is only getting pushed by foreign banks, although there have been spurts of some paying by domestics."


Trades across segments were scattered, with only the two-year and five-year segments reporting notional amounts traded above 10 bln rupees today. Rate cuts within the next 12 months remained unlikely, with the market largely expecting the Reserve Bank of India to only unwind its tightened liquidity measures sometime during the period, dealers said.


There are no domestic cues ahead of the minutes of the Monetary Policy Committee's October meeting, scheduled after market hours on Friday, dealers said.


"No one wants to trade the short-term swaps if there are no triggers on rates. What's the point?" a dealer at a foreign bank said.



On Wednesday, swap rates may open higher after US retail sales for September beat estimates and suggested that the US Federal Reserve might either tighten monetary policy further or keep rates higher for longer, dealers said.


Data released after Indian market hours showed US retail sales rose 0.7% on month, against an estimate of 0.3% by economists polled by Dow Jones.


Traders will also watch out for any sharp movement in crude oil prices at open.


The swap rate in the one-year segment is seen at 6.90-7.10% and in the five-year segment at 6.60-6.80%.



At 1700 IST


1-year OIS


2-year OIS


5-year OIS


2-year MIFOR


5-year MIFOR





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


Edited by Vidhi Verma


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