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Informist, Monday, Oct. 20, 2025

 

By Srijita Bose

 

MUMBAI – Rates on most overnight indexed swaps ended largely unchanged from the previous session due to lack of domestic cues, dealers said. Many traders are on leave as money markets are shut Tuesday and Wednesday for Diwali, which led to muted trade volume, they said.

 

The one-year swap rate closed at 5.42%, down from 5.44% Friday. The five-year swap closed at 5.61% against 5.62% Friday. The total notional trade volume on Clearing Corp. of India's derivatives trading platform was INR 146 billion, less than half of INR 392.30 billion on Friday.

 

Most swaps traded in a thin band during the day due to lacklustre volume, dealers said. Shorter-tenure swaps maturing in less than a year rose slightly early in the day tracking rise in money market rates, they said. The overnight Mumbai Interbank Offered rate -- the floating rate of an OIS contract -- rose to 5.64% Monday from 5.55% on Friday.

 

However, the rise in rates was limited as most domestic traders were absent and on expectations that swap rates would fall in the near term due to hopes of a rate cut by the Reserve Bank of India's Monetary Policy Committee, dealers said. Some traders also chose to receive rates in longer tenure swaps on the view that swap rates will fall in the near term, they said.

 

"There should have been some upside bias today, but mostly rates were steady, and in the end we saw some receiving bias as well," a dealer at a private sector bank said. "Overall, there is still some scope of a breakout on the lower side in swaps due to December rate cut hopes (by MPC), but US yields also have to behave well for that."

 

Some offshore traders likely received fixed rates in the one- and five-year swap rates, dealers said. These trades complemented with buys of Indian government bonds maturing within five years by foreign portfolio investors, they said. 

 

Meanwhile, the 10-year US Treasury yield rose above the 4.00% mark to 4.03%, up from 3.99% at 1700 IST Friday. Some traders said they will track offshore triggers ahead of the US Federal Open Market Committee's meeting later this month.

 

OUTLOOK

On Thursday, swaps may take cues from the movement of US Treasury yields. The movement in swap rates may be limited as some traders may remain absent from trading desks.

 

With the minutes of the Monetary Policy Committee's Sept. 29-Oct. 1 meeting seen weakening the case for a February rate cut, traders do not expect a sharp movement in OIS rates based on domestic cues in the near term, dealers said. Traders are likely to retain their rate cut bets for December after CPI inflation fell to an over-eight-year low of 1.54% in September from 2.07% in August.

 

Economists project October CPI inflation at less than 1%, the lowest in the current series with 2012 as the base year. This is likely to put pressure on the Monetary Policy Committee to ease rates further, though a December rate cut is fully priced into the one-year swap rate for the past several weeks and will not move swap rates lower, dealers said.

 

On the global front, traders may track developments in the US after the government partially shut down early this month. Traders may take cues from further geopolitical developments, especially on India-US trade talks.

 

Swaps may also track the movement of the rupee against the dollar and of crude oil prices. The one-year swap rate is seen in the range of 5.38-5.48% and the five-year contract at 5.55-5.66%.

 

	At 1700 IST	FRIDAY
1-year OIS	5.42%	5.44%
2-year OIS	5.36%	5.38%
5-year OIS	5.61%	5.62%
2-year MIFOR	5.80%	5.79%
5-year MIFOR	6.22%	6.21%

 

End

 

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

 

Edited by Ashish Shirke

 

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