India IRS Review
Up as offshore traders pay fixed rates on rise in US ylds
This story was originally published at 19:07 IST on 31 October 2024
Register to read our real-time news.Informist, Thursday, Oct. 31, 2024
By Aaryan Khanna
NEW DELHI – Overnight indexed swap rates rose as offshore traders paid fixed rates through the day due to a rise in US Treasury yields, dealers said. The volume was generated largely due to flows, with trade activity in the domestic market muted during the truncated week.
The one-year swap rate ended at 6.55%, against 6.52% on Wednesday. The five-year swap rate settled at 6.30%, against 6.27% the previous trading day. Money markets are shut on Friday for Diwali, but several traders were on leave as the festival is being celebrated on Thursday in many parts of the country.
The yield on the 10-year benchmark US Treasury note jumped to 4.29% from 4.23% at the close of Indian markets Wednesday. US data released after market hours presented mixed cues on the pace of US rate cuts. The ADP private sector jobs report showed that jobs grew by 233,000 in October, over double the market's consensus estimate. The US government's advance estimate for GDP showed the world's largest economy grew 2.8% in Jul-Sept, down from the previous quarter and missing analysts' estimates.
Offshore traders paid fixed rates as rates in the non-deliverable OIS segment were higher than the onshore market, generating an arbitrage opportunity, dealers said. Other than being counterparties, domestic traders did not receive fixed rates aggressively despite the rise, on caution before several key US data points left in the week and the lack of ability to react to them until Monday.
"There was nothing onshore, it was all foreigners who were paying (fixed rates)," a dealer at a primary dealership said. "Today (Thursday) is one of the days where you learn to ignore the movement because it doesn't show anything, since half the market was not really trading."
The US Federal Reserve's preferred inflation gauge and weekly unemployment claims are due after market hours on Thursday, while the October employment report is scheduled on Friday. Next week, the US elections will take centre stage on Tuesday, before the US Federal Open Market Committee meets on Nov. 6-7.
"There are too many uncertainties, so we will go with the flow," a dealer at a private bank said.
There was limited movement in near-term swap rates due to a lack of interest rate cues on the domestic front, dealers said. Traders are only pricing in the Reserve Bank of India's Monetary Policy Committee to cut the policy repo rate by 25 basis points in February, dealers said. The rate cut hopes have been pushed back from earlier expectations of December due to higher-than-expected consumer inflation in September. CPI inflation in October is set to print near 6%, the upper limit of the RBI's tolerance band on price rise, according to IDFC FIRST Bank Research.
OUTLOOK
Money markets are shut on Friday for Diwali, and OIS rates are not traded on Saturday. On Monday, the movement of US Treasury yields after a slew of economic data due this week may lend cues. Further insight on the outcome of the US elections on Tuesday will also be eyed, dealers said.
US personal consumption expenditure data for September and weekly unemployment claims are due at 1800 IST, along with the US employment report for October. These data points will be watched closely ahead of the US FOMC meeting next week.
In addition, developments in the conflict in West Asia and the movement in crude oil prices may also be a factor for OIS rates. The swap rate in the one-year segment is seen at 6.45-6.65% and in the five-year segment at 6.15-6.40%.
| At 1700 IST | WEDNESDAY |
1-year OIS | 6.55% | 6.52% |
2-year OIS | 6.30% | 6.27% |
5-year OIS | 6.30% | 6.27% |
2-year MIFOR | 6.55-6.67% | 6.49-6.61% |
5-year MIFOR | 6.76-6.88% | 6.70-6.82% |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Saji George Titus
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2024. All rights reserved.
To read more please subscribe
Share this Story:
