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Informist, Thursday, Oct. 30, 2025

By Srijita Bose

MUMBAI – Overnight indexed swap rates ended higher Thursday as US Treasury yields rose overnight after hawkish comments by Federal Reserve Chair Jerome Powell, dealers said. Swap rates also rose as traders pared back their expectations of a rate cut by the Reserve Bank of India's Monetary Policy Committee in December.

The one-year swap rate ended at 5.48%, 1 basis point higher than the previous close. Meanwhile, the five-year swap rate ended at 5.69%, up from 5.66% on Wednesday. The total notional trade volume on Clearing Corp. of India's derivatives trading platform was INR 358.65 billion, sharply up from INR 134.45 billion on Wednesday. 

In a widely expected move, the US Federal Open Market Committee cut the federal funds target range by 25 basis points for the second meeting in a row to 3.75-4.00% Wednesday. The panel also decided to conclude the US Fed's monthly securities sales, also known as quantitative tightening, from Dec. 1. 

At a post-policy press conference, Powell said, "A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it, policy is not on a preset course." The yield on the benchmark 10-year US Treasury note rose to 4.09% during the day, from 4.00% at 1700 IST Wednesday.

Domestic traders were betting that the 10-year US yield would fall to as low as 3.85% in the medium term. Traders paid fixed rates in swaps tracking the rise in US yields. dealers said. The rise was more in the longer-term swaps.

"Powell's comments were the main dampener today and offshore guys were paying," a dealer at a private sector bank said. "But swaps are relatively well behaved."

Meanwhile, the lower chances of a US rate cut in December also dampened hopes of a rate cut by the Monetary Policy Committee in December, dealers said. However, the rise in swaps was limited as traders received swaps while selling government bonds, dealers said.  

"I would still like to receive swaps and keep some bets on a December cut and these rates are also good," a dealer at a primary dealership said. "The reaction in bonds was more on this front, actually, in one-year OIS, the space for move is not much, I feel like." 

Some traders have already trimmed their rate-cut bets amid expectations that the US would enter into a trade deal with India, which would lower the risk of a slowdown in GDP growth. This also likely limited the rise in swap rates, especially shorter tenure contracts, dealers said. 

OUTLOOK

On Friday, swap rates may track movement in US Treasury yields after comments by US Federal Reserve Vice Chair Michelle Bowman. Any sharp movement in government bond yields could also lend cues to swaps, dealers said. 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 is seen at 5.55-5.74%.

End

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

Edited by Saji George Titus

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