More Stories

Informist, Thursday, May 15, 2025

By Aaryan Khanna

NEW DELHI – Overnight indexed swap rates ended slightly higher on Thursday, tracking a rise in US Treasury yields. The paying was spearheaded by offshore traders, while domestic private banks and primary dealerships continued to receive fixed rates on the view of further rate cuts in India, dealers said.

The one-year swap rate ended at 5.63%, flat against Wednesday's close. The five-year swap ended at 5.68%, up from 5.66% the previous day. The total notional trade volume on the Clearing Corp. of India's derivatives trading platform was INR 524.70 billion, higher than INR 417.50 billion Wednesday.

The yield on the 10-year US Treasury note rose to as high as 4.55%, its highest level in almost three months, as traders braced for a slew of data later Thursday. The easing of trade tensions between the US and China lowered the chances of further rate cuts in the world's largest economy, which was pushing up US yields and driving offshore traders away from receiving India's OIS, dealers said. At 1700 IST, the 10-year US yield was at 4.51%, up from 4.46% at the end of Indian market hours Wednesday. The easing of the US yields in the latter half of the day also helped the five-year OIS rate end off highs.

"Foreign banks and mostly offshore traders were paying today," a dealer at a private-sector bank said. "The non-deliverable OIS points are now also marginally higher than onshore, so the trend from the offshore part is reversing."

Traders also paid fixed rates in the Mumbai Interbank Offered Rate-linked swap rates while receiving swap rates linked to the Mumbai Interbank Forward Offered Rate, citing attractive spreads. This led to an increase in the trade volumes in the one-year swap, which was the most traded contract Thursday despite its narrow traded range at 5.63-5.65%.

Dealers said they were not keen to receive near-term swap rates as the receiving momentum from offshore traders had vanished, and the rates were not profitable enough to place large bets on more rate cuts. Swap rates are pricing in another 50 basis points of repo rate cuts by the Reserve Bank of India's Monetary Policy Committee to 5.50% in June and August. The one-year swap rate already reflects either a small chance for a 50-bps repo at the June policy review, or another 75 bps of rate cuts in the cycle, dealers said. 

"The market is waiting for the GDP data for the real big kick in terms of whether you can price in rate cuts beyond 5.50% (repo rate)," a dealer at a primary dealership said. "But even looking at the US, traders are tracking very closely over what impact their rate cycle could have on us once again." 

India will detail its GDP estimates for Jan-Mar and 2024-25 (Apr-Mar) on May 30. Implied growth projections by the government show that the economy grew 7.6% in the quarter ended March, while market participants expect it to be lower, reinforcing the case for rate cuts, dealers said. IDBI Bank has forecast Jan-Mar GDP growth at 5.6%.

OUTLOOK

On Friday, swap rates will likely track the overnight movement in US Treasury yields after a slew of economic data on Thursday, dealers said. The US is set to release producer price index data and retail sales data for April, along with weekly jobless claims and industrial production data. 

Traders also await the RBI's surplus transfer to the central government, which is likely to be announced after a meeting of the central bank's board on May 23. Traders estimate the dividend to be around INR 3 trillion, which will add durable liquidity to the banking system. If the transfer is in line with or above the estimate, it could pull swap rates down, dealers said.

Traders will also track the movement of the overnight Mumbai Interbank Offered Rate for direction on short-term swap rates. The one-year swap rate is seen in a range of 5.50-5.75% Friday. The five-year contract is also seen in the 5.50-5.75% range.

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. 2025. All rights reserved.