India IRS Review
Fall tracking US yields after softer US labour mkt data
This story was originally published at 19:30 IST on 30 October 2024
Register to read our real-time news.Informist, Wednesday, Oct. 30, 2024
By Aaryan Khanna
NEW DELHI – Overnight indexed swap rates ended slightly lower Wednesday due to a fall in US Treasury yields, dealers said. The fall was limited as domestic traders had received fixed rates in large volumes Tuesday, which had already pulled down swap rates.
The one-year swap rate ended at 6.52%, against 6.54% on Tuesday. The five-year swap rate settled at 6.27%, against 6.29% the previous trading day.
The 10-year US Treasury yield retreated from a nearly four-month high on Tuesday after data indicated a cooling labour market. US job openings in September fell to their lowest in over three-and-a-half years, to 7.44 million, missing estimates. Federal Reserve Chair Jerome Powell had said that the US central bank did not welcome further weakness in the labour market, before the Federal Open Market Committee cut rates by 50 basis points in September. The yield on the 10-year US Treasury note fell to 4.24% at Indian market close, from 4.31% at 1700 IST Tuesday.
"We are seeing quite good receiving today (Wednesday) because of US yields. However, a similar fall is not seen in the swap rates," a dealer at a private bank said. "This is because we saw a good amount of receiving yesterday (Tuesday) itself."
Traders were cautious of placing large bets ahead of crucial data on GDP and jobs ahead of the US FOMC meeting next week. Even with the sharp fall in US yields, foreign banks placed limited fresh bets other than tracking offshore flows in the non-deliverable OIS segment, dealers said.
On the other hand, the one-year swap saw significant trading volumes for the second day in a row due to the contrast between offshore and domestic cues. Near-term swap rates had limited room to fall further, with rate cuts in India seen beginning only in February instead of December, dealers said.
"The two-year is looking like a good point to receive and play the curve right now," a dealer at a foreign bank said. "There are a lot of other flows that are disturbing both the one-year and five-year points, including the (US) election coming up."
OUTLOOK
On Thursday, the movement of US Treasury yields and crude oil prices will also be closely watched. Further cues on the outcome of the US elections on Tuesday, will also be eyed, dealers said.
US GDP for Jul-Sept grew 2.8%, lower than the market consensus, according to advance estimates released after Indian market hours. US personal consumption expenditure data is also due this week. These data points will be watched closely ahead of the US FOMC meeting from Nov. 6-7.
In addition, developments in the conflict in West Asia will be keenly tracked. The swap rate in the one-year segment is seen at 6.45-6.62% and in the five-year segment at 6.12-6.30%.
| At 1700 IST | TUESDAY |
1-year OIS | 6.52% | 6.54% |
2-year OIS | 6.27% | 6.30% |
5-year OIS | 6.27% | 6.29% |
2-year MIFOR | 6.49-6.61% | 6.53-6.65% |
5-year MIFOR | 6.70-6.82% | 6.74-6.86% |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
With inputs from Siddhi Chauhan
Edited by Tanima Banerjee
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