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Informist, Thursday, Nov. 13, 2025

By Cassandra Carvalho

MUMBAI – Overnight indexed swap rates ended steady in a thin trade Thursday due to lack of certainty on the rate cut trajectory in both India and the US, after India's CPI inflation for October, released Wednesday, failed to cement bets of a rate cut by the Reserve Bank of India's Monetary Policy Committee in December. Traders await fresh triggers, especially India's GDP growth data for the September quarter, due end of this month.

The one-year swap rate ended at 5.46%, the same as Wednesday. The five-year swap rate also ended flat from Wednesday's close, at 5.71%. The total notional trade volume on Clearing Corp. of India's derivatives trading platform was INR 166.30 billion, down from INR 202.85 billion on Wednesday. The yield on the 10-year benchmark US Treasury note was 4.10% at 1700 IST, from 4.09% at the same time Wednesday.

Traders had mixed views to India's headline inflation for October printing at a record low. Data released Wednesday showed CPI inflation fell to 0.25% in October from 1.44% in September. The headline print could have been even lower last month if not for the record high prices of gold and silver and some dealers who were expecting deflation were disappointed. However, the figure is still far below the RBI's target range. As expected by most traders, swap rates opened higher Thursday as several traders who were expecting deflation in October unwound those bets. However, swaps came off the day's high, and some traders said that the CPI inflation was still low enough for the MPC to cut rates in December. 

"OIS is getting received to some extent, last two-three days we're seeing some good receiving interest in the market," a dealer at a private sector bank said. "Market still expects one cut can happen, I don't think there's any change in that view...CPI is still a very good number."

In early trade, there was likely an error trade in the five-year swap rate, dealers said. At 0911 IST, a trade of INR 350 million was conducted in the five-year swap rate at 5.65%. Traders said it was a fat-finger trade and that the dealer placing the bid may have meant to place the bid in the four-year swap rate. The four-year swap rate was not traded Thursday, and was last traded at 5.65% on Monday.  

Traders also had little to track from global cues. After US President Donald Trump signed the funding bill to end the longest-ever government shutdown in the US earlier in the day, traders expect the 10-year US Treasury yield to rise in the near term, especially if the release of fresh economic data post shutdown indicates resilience in the US economy, dealers said. However, the movement of US yields will ultimately depend on economic data for cues on the rate cut trajectory by the US Federal Open Market Committee. The US jobs and consumer price index reports for October are likely to be never released due to the government shutdown, White House Press Secretary Karoline Leavitt said. 

Traders now await any indications of a trade deal between the US and India being finalised, with most expecting a deal by end of this month. US President Donald Trump earlier this week said that the US is coming closer to making a "fair trade deal" with India. "We're making a deal with India. Much different than we had," Trump said during the swearing-in ceremony of Sergio Gor as the Ambassador to India. "Right now they don't love me but they will love us again. We're getting a fair deal." Potential developments towards a deal are seen pushing up swap rates as a breakthrough weakens the case for the MPC to cut rates in December. 

"No one is taking any shorts (short bets) because of the RBI but no one is going long because no view on rate cuts. No one is taking any overnight positions because of the trade deal," a dealer at another private sector bank said. "It could come anytime, some traders are expecting it to come this weekend. The view was that after the (US government) shutdown ends they (the US and Indian governments) will prioritise the deal."  

OUTLOOK

On Friday, swap rates are likely to track gilt and US Treasury yields at market open, dealers said. Traders will also track geopolitical developments, especially regarding a US-India trade deal, or any developments in the investigation into the Monday car blast in Delhi, after the Centre called the incident an act of terrorism. Any names of foreign groups or countries being involved in the attack will push up swap rates as it will trigger dealers' concerns of retaliation by India, dealers said.  

On the data front, traders await Jul-Sept GDP data, due on Nov. 28, for cues on the possibility of rate cuts by the RBI's Monetary Policy Committee, after CPI inflation data failed to increase bets of a rate cut in December. India's GDP likely grew 7.2% in the September quarter, according to India Ratings and Research Pvt. Ltd. 

Any demand for bond forward rate agreements by insurers and pension funds for the long-term gilt at the weekly bond auction Friday may lead to banks hedging these agreements by paying fixed rate contracts in longer-term swap rates, dealers said.   

Traders will also track systemic liquidity and the overnight Mumbai Interbank Offered Rate, dealers said. The overnight MIBOR rate has been set below the repo rate for the entire month so far, after being set at 5.69% on Oct. 31. Traders may continue to trade in swaps maturing in less than a year to adjust their rate cut bets and bet on spreads between MIBOR and money market rates, dealers said. 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 5.65-5.80%.

End

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

Edited by Akul Nishant Akhoury

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