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Informist, Monday, Nov. 3, 2025

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates ended steady Monday, due to uncertainty on the rate trajectory and lack of fresh triggers, dealers said. Some offshore traders paid fixed-rate contracts to hedge their gilt purchases. 

 

The one-year swap rate ended at 5.47%, from 5.48% Friday. The five-year swap rate ended at 5.68%, against 5.67% Friday. The total notional trade volume on Clearing Corp. of India's derivatives trading platform was INR 205.55 billion, down from INR 394.20 billion Friday. At 1700 IST, the yield on the 10-year benchmark US Treasury note was 4.09% , down from 4.11% at the same time Friday. 

 

"Offshore were paying five-year OIS in the morning while buying bonds in the secondary market," a trader at a primary dealership said. "Apart from that, (there were) not much cues in the market."

 

Offshore traders were paying fixed-rate contracts in the five-year swap rate to hedge their bond purchases, but in thin volumes, dealers said. Foreign portfolio investors net sold gilts worth INR 358.60 million through the fully accessible route as of 1700 IST, data from Clearing Corp. of India showed. A single large investor likely paid fixed rates in the four-year swap rate, dealers said. The rate ended at 5.63%, up 3 basis points from Friday's close, with total traded volume of INR 1.25 billion, conducted in a single trade.      

 

Uncertainty on the likelihood and timeline of a trade deal between the US and India weighed on sentiment and traders preferred sitting on the sidelines rather than placing any fresh bets, dealers said. Subsequently, hopes of a rate cut by the Reserve Bank of India's Monetary Policy Committee in December also hinged on the possibility of a trade deal. Traders await fresh economic data, such as CPI inflation for October and GDP growth data for Jul-Sept, for further cues on rates. 

 

"Its (the five-year swap rate) been there only, within 5.67% to 5.70%," a dealer at a private sector bank. "I think if it rises above the 5.70% then it'll be a problem."  

 

Traders were expecting some support from the central bank, such as open-market purchases of gilts through auctions, to lower bond yields and aid systemic liquidity after the RBI's dollar sales in the foreign exchange market drained liquidity in October. However, the lack of any announcement so far disappointed traders.  Moreover, liquidity in the banking system has returned to a comfortable surplus after largely being in deficit in the final days of October. The RBI net absorbed – a proxy for liquidity surplus – INR 1.11 trillion Sunday, tad up from INR 1.09 trillion Saturday.

 

OUTLOOK

On Tuesday, swap rates may track movements in the US Treasury yields at open. 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.

 

On the data front, traders await domestic CPI inflation for October, due on Nov. 12. Traders have largely priced in a low CPI print, but the impact of the Centre's cut in goods and services tax rates, which took effect on Sept. 22, is yet to be ascertained, dealers said. GDP growth data for Jul-Sept will also be tracked, due on Nov. 28. There is no immediate domestic data scheduled 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%.

 

	At 1700 IST	FRIDAY
1-year OIS	5.47%	5.48%
2-year OIS	5.44%	5.43%
5-year OIS	5.68%	5.67%
2-year MIFOR	5.81%	5.83%
5-year MIFOR	6.24%	6.25%

 

End

 

Edited by Saji George Titus

 

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