More Stories

Informist, Thursday, Dec. 12, 2024

By Aaryan Khanna

NEW DELHI – Overnight indexed swap rates ended steady as India's CPI inflation cooled to 5.48% in November, in line with traders' expectations, from 6.21% in October, dealers said. Offshore traders likely paid fixed rates in the five-year swap rate as US Treasury yields rose. 

The one-year swap rate ended at 6.41%, against 6.40% Wednesday. The five-year swap rate settled at 6.04%, up from 6.02% the previous day.

Trade volume wes concentrated in the one-year swap rate ahead of the India CPI print, released at 1600 IST. Traders placed large bets in the short-term contract, firming their view of a 25-basis-point repo rate cuts in India each in February and April. There was hardly any volatility after the print, as it did not lead to any change in the rate cut view already priced in, dealers said. Of the INR 134.55 billion of notional traded volume in the one-year swap rate on the Anonymous System for Trading in Rupee OTC Interest Rate Derivatives, or 'ASTROID' platform, only about INR 15 billion took place after the print.

"OIS did not at all react to CPI, one way or another," a dealer at a private bank said. "Even in the sub-one-year segment, everyone had already positioned much before the CPI data came. All the action was happening on g-sec (government securities) post 1600 IST."

Meanwhile, offshore traders paid fixed rates through the day on a reassessment of US rate cut hopes in 2025, which reflected in a rise in US Treasury yields, dealers said. The paying pressure was not aggressive, but led to the five-year contract inching up.

"For the FOMC (Federal Open Market Committee), we think that it could move forward with a 25bps rate cut in December reflecting the need to bring policy rates closer to the neutral level," ICICI Bank said in a research report Thursday. "However, the case for a much more staggered easing cycle going into 2025 has increased reflecting resilient economic activity and stickiness in inflation pressures."

The yield on the 10-year US Treasury note rose to 4.30% at the end of Indian market hours, from 4.24% on Wednesday. US CPI inflation data for November, released on Wednesday, came in along expected lines. US yields temporarily eased after the print, as it cemented bets that the FOMC would cut rates by 25 basis points at its meeting next week. However, US yields rose subsequently as traders assessed that disinflation in the US had stalled.

"For the two- and five-year swaps, there was steady paying from offshore guys," a dealer at a primary dealership said. "It's a natural response to the rise in US yields, but I'm not sure it will follow through from these levels, considering (India) CPI was actually very decent."

OUTLOOK

On Friday, swap rates will take cues from the overnight movement in US yields, dealers said. Short-term swap rates may ease slightly in a delayed reaction to India's CPI inflation print for November, which was slightly lower than 5.6% estimated in an Informist poll.

Domestic traders will also look out for further news on geopolitical tensions, dealers said. The swap rate in the one-year segment is seen at 6.30-6.50% and in the five-year segment at 5.90-6.10%.

End

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

Edited by Deepshikha Bhardwaj

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.