India IRS Review
Down tracking fall in US yields; Powell's comments awaited
This story was originally published at 18:30 IST on 1 July 2025
Register to read our real-time news.Informist, Tuesday, Jul. 1, 2025
By Cassandra Carvalho
MUMBAI – Overnight indexed swap rates ended down on offshore flows tracking a fall in US Treasury yields, dealers said. Traders await comments from US Federal Reserve Chair Jerome Powell for further cues on the rate cut trajectory in the US. Traders also tracked the fall in bond yields, dealers said.
The one-year swap rate ended at 5.53%, down from 5.54% on Monday. The five-year swap rate ended at 5.67%, from 5.71% Monday. The total notional trade volume on Clearing Corp. of India's derivatives trading platform was INR 276.85 billion, more than double from INR 116.10 billion Monday.
With the current movement, it looks like we'll fall (the 10-year US yield will fall) to 4.10% today (Tuesday) evening," a trader at a primary dealership said. "The 4.10%-4.12% range is key. If we fall below that, we can fall to 3.80% also." If the 10-year US yield sustains a fall below 4.10%, the 5-year swap rate could fall to 5.55%. Traders speculate that the 10-year US yield could hover around 4.05-4.07% in the near term.
The yield on the 10-year benchmark US Treasury note fell to a two-month low of 4.20%, from 4.22% at 0900 IST, and 4.26% at 1700 IST Monday. US yields fell further as traders expect a quicker pace of rate cuts by the US Federal Open Market Committee due to softening economic data, with expectations of at least three rate cuts in the remainder of 2025. Traders await comments by Powell, who will join other central bank chiefs at the European Central Bank forum at Sintra in Portugal. Powell's remarks may offer some insight into the US economy and monetary policy trajectory.
Offshore investors received fixed-rate contracts following the fall in US yields, dealers said. The 5-year non-deliverable OIS was half a basis point lower than the 5-year swap rate, dealers said. Domestic traders also tracked the fall in bond yields and the overnight Mumbai Interbank Offer Rate. The MIBOR fell to 5.35% Tuesday from 5.52% Monday. The 10-year benchmark 6.33%, 2035 gilt yield ended 3 basis points lower on purchases from foreign portfolio investors and state-owned banks, dealers said.
Market sentiment was also aided by speculation that the Reserve Bank of India was buying gilts in the secondary market, after Clearing Corp. of India data showed 'Others' bought gilts worth INR 40.00 billion in the secondary market Monday.
"The 'Others' data is good news, and the market had sold (paid) too much," a dealer at a private sector bank said. "The constituent buy number was also good yesterday (Monday), which has helped sentiment."
The 7-year swap was traded Monday and Tuesday, likely due to a large entity's hedging requirement, dealers said.
OUTLOOK
On Wednesday, swap rates are likely to take cues from the movement in US Treasury yields after Powell's comments in Portugal, dealers said. Some traders said that if the FOMC votes to cut rates in July, then the five-year swap rate could also fall by more than 10 bps as domestic rate cut expectations could resurface.
Traders will also watch whether the Senate passes US President Donald Trump's contentious spending bill. Trump is urging lawmakers to pass it before Jul. 4, the US Independence Day holiday.
"I think the focus is all on US yields now," a dealer at a private sector bank said. "The US rate cut scenario is gaining momentum.
On the domestic front, traders will now watch for any further announcement of variable rate reverse repo auctions by the RBI. Traders are closely tracking overnight borrowing rates, which have risen since the VRRR auction Friday. The daily MIBOR fixing will also lend cues after the initial hours.
Swap rates may also track the movement of gilt yields. The one-year swap rate is seen in the range of 5.46-5.60% Tuesday. The five-year contract is seen at 5.62-5.84%.
At 1700 IST | MONDAY | |
1-year OIS | 5.53% | 5.54% |
2-year OIS | 5.49% | 5.51% |
5-year OIS | 5.67% | 5.71% |
2-year MIFOR | 5.90-6.02% | 5.92-6.04% |
5-year MIFOR | 6.13-6.25% | 6.16-6.28% |
End
US$1 = INR 85.52
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 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2025. All rights reserved.
To read more please subscribe
Share this Story:
