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Informist, Tuesday, Nov. 11, 2025

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates ended largely steady Tuesday due to lack of fresh triggers on the domestic interest rate trajectory. During the day, swaps largely tracked the movement of bond yields, and some traders played on spreads between swap rates due to lack of other cues. Traders await CPI inflation data for October, due on Wednesday.     

 

The one-year swap rate ended at 5.47%, the same as on Monday. The five-year swap rate ended at 5.73%, against 5.72% Monday. The total notional trade volume on Clearing Corp. of India's derivatives trading platform was INR 1.07 trillion, sharply higher than INR 384.85 billion Monday. 

 

The five-year swap rate opened at 5.74% for the second consecutive day, tracking a slight rise in bond yields after concerns about a terror attack in New Delhi Monday, but soon gave up gains as bond yields fell on bets of the Reserve Bank of India purchasing the 10-year 6.33%, 2035 gilt in the secondary market Tuesday. Some traders who bought 10-year gilts on bets of the RBI buying gilts onscreen hedged their purchases by paying fixed rate contracts in the five-swap rate, dealers said. 

 

Traders focused on positioning before India's CPI inflation data for October, due at 1600 IST Wednesday. Several traders received fixed rate contracts on bets of the headline inflation print being lower than initially estimated. Traders largely expect headline inflation in the range of 0.3-0.7%. If the data is within expectations or lower, traders would ramp up bets of a rate cut in December, since RBI Governor Sanjay Malhotra said at the outcome of the October Monetary Policy Committee meeting that low inflation created space for policy easing. Expectations of India slipping into deflation in October are gaining traction, dealers said. Deflation is when inflation falls into negative, suggesting prices have fallen.   

 

"People are expecting deflation, so we're seeing some receiving in OIS because of that," a dealer at a private sector bank said. "The one-year (swap rate) can move four to five bps either side post CPI. For five-year on the downside it could go to 68 (5.68%) again. (On the upside) I think 5.72% on the five-year swap is a strong resistance, if it does not cross (rise above) this level. I don't want to go long in five-year."     

 

Traders had little to track from global cues as well. The US bond market is closed on Tuesday due to Veterans Day holiday. The yield on the 10-year benchmark US Treasury note was 4.12%, little changed from 4.13% at 1700 IST Monday. Traders are unsure of the trajectory of the 10-year US yield, with some expecting a rise. Indications of an end to the US government shutdown have lifted expectations that US economic data could be released before the US Federal Open Market Committee's next policy meeting in December. 

 

"People are keen to book profits, everything is between a 1-2 bps range only," a dealer at another private sector bank said. "There are desks which are trading in OIS alone, but let's be honest, no one knows where US is going. If any (foreign) flows come in then just go with the flow. Else, people are trying to do spreads (spread trades) to at least try to get something out of it. Pay two-year receive one-year or receive one-year pay two-year, or do bond-OIS spread."     

 

Short-term swap rates maturing in less than a year continued to see healthy volumes, but due to the low tenure and its per-basis-point value, traders dismissed the large volumes. The one-month swap rate saw the highest volume across tenures, at INR 571.30 billion, sharply higher than INR 47.75 billion Monday. Traders were largely rolling over their bets from the one-month swap rate to the two-month, and henceforth, dealers said. 

 

OUTLOOK

On Wednesday, swap rates are likely to track the movement of gilt yields and US Treasury yields at market open, dealers said. Traders will also track data from the Clearing Corp. of India on segment-wise daily purchases and sales of government bonds for any indication of central bank onscreen purchases, dealers said. Later in the day, focus will be on CPI data for October, for cues on further rate cuts by the Reserve Bank of India's Monetary Policy Committee. Until CPI data is released, traders may avoid aggressive positions. GDP growth data for Jul-Sept, due on Nov. 28, will also be tracked. 

 

Traders will also track systemic liquidity and subsequently, the overnight Mumbai Interbank Offered Rate, dealers said. Traders will also track developments in India-US trade talks, and developments on the car blast in New Delhi Monday. Traders may unwind their positions if the government indicates any sign of retaliation to the blast, after trade minister Piyush Goyal said that the car blast showed "terrorism rearing its head again".

 

Swaps may also track the rupee's movement against the dollar and crude oil prices. The one-year swap rate is seen in the range of 5.40-5.55% and the five-year contract is seen at 5.68-5.80%.

 

	At 1700 IST	MONDAY
1-year OIS	5.47%	5.47%
2-year OIS	5.46%	5.46%
5-year OIS	5.73%	5.72%
2-year MIFOR	5.84%	5.82%
5-year MIFOR	6.29%	6.27%

 

End

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

 

Edited by Avishek Dutta

 

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