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Informist, Wednesday, Oct. 29, 2025

By Srijita Bose

MUMBAI – Overnight indexed swap rates ended steady Wednesday ahead of the US Federal Open Market Committee's meeting outcome, to be announced later in the day, dealers said. Swaps did not react sharply even after positive comments from US President Donald Trump on a trade deal with India as traders have already priced in the possibility of one, they said. 

The one-year swap rate ended at 5.47%, flat against Tuesday. The five-year swap rate ended at 5.66%, same as Tuesday's close. The total notional trade volume on Clearing Corp. of India's derivatives trading platform was INR 134.45 billion, sharply down from INR 463.05 billion on Tuesday. 

Traders await the US FOMC's decision on rates scheduled to be announced late Wednesday. Fed fund futures traders have priced in a 25-basis-point rate cut each at the FOMC's October and December meetings, hopes of which were cemented by a slightly lower-than-expected US CPI print for September. Traders also expect the US Federal Reserve to announce an end to its balance-sheet reduction on Wednesday. If the FOMC signals further rate cuts post December on Wednesday, the 10-year US yield could fall to 3.85%, dealers said. 

Some traders received fixed rates in early trade. However, US rate cuts have already been priced in, dealers said, which limited the move in swaps.

"There was not much volume today (Wednesday), but I think a move in gilts somewhat also led to some move in swaps," a dealer at a private sector bank said.

However, some offshore traders likely paid fixed rates while buying government bonds, dealers said. This was due to a rise in the rupee against the dollar after Trump's comments, they said. Speaking at the Asia-Pacific Economic Cooperation leaders' Summit in South Korea on Wednesday, Trump said, "I'm doing a trade deal with India, and I have great respect and love for Prime Minister Modi. We have a great relationship."

Some dealers said traders also likely paid fixed bets in the latter half of the session after Reserve Bank of India Deputy Governor Poonam Gupta's comments during the day. 

Gupta said during a fireside chat at the Business Standard BFSI Summit Wednesday that there is still room to ease monetary policy as growth is below potential and aspirations even at 6.8% in 2025-26 (Apr-Mar), but when and how much remains to be seen. This was similar to her comments in the minutes of the RBI Monetary Policy Committee's last meeting and hence, did not increase rate cut hopes, dealers said. Some traders said their rate view was unaffected by Gupta's comments.

OUTLOOK

On Thursday, swap rates may track the movement of US Treasury yields after the US Federal Reserve's monetary policy decisions late Wednesday. The Fed is expected to cut rates by 25 bps. Traders will also track developments in India-US trade talks.

There is no immediate data scheduled on the domestic front that is likely to have a significant impact on swap rates, dealers said. Swaps may also track the rupee's movement against the dollar and of crude oil prices. The one-year swap rate is seen in the range of 5.38-5.52% and the five-year contract at 5.55-5.74%.

End

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

Edited by Tanima Banerjee

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