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Informist, Thursday, Nov. 20, 2025

 

By Aaryan Khanna

 

NEW DELHI – Overnight indexed swap rates rose Thursday as US Treasury yields inched up after the minutes of the US Federal Open Market Committee's October meeting, dealers said. Traders received fixed rates ahead of the release of the minutes and unwound their bets, especially in the five-year contract.

 

The one-year swap rate ended at 5.46%, against 5.45% Wednesday. The five-year swap rate had fallen 3 basis points between Monday and Wednesday's close, and recouped that entire fall to end at 5.76%. The total notional trade volume on Clearing Corp. of India's derivatives trading platform was INR 505.85 billion, up from INR 388.40 billion in the previous session. 

 

The 10-year US Treasury yield rose slightly to 4.14% at 1700 IST from 4.13% at the end of Indian market hours Wednesday. Expectations of a 25-basis-point rate cut at the meeting shrank to 33% from 50% a day prior, according to the CME FedWatch tool. Minutes of the US FOMC meeting showed a divide in policymakers' views on whether borrowing costs needed to be lower in the face of above-target inflation and a weakening labour market. Meanwhile, a US government agency said that it would skip the October non-farm payrolls and delay the release of November jobs data until after the FOMC's next meeting on Dec. 9-10. The data was expected to make a stronger case for rate cuts, and this makes the September non-farm payrolls data after Indian market hours Thursday even more crucial. 

 

"This now puts traders in a place where US yields are all set to blow up if one data point goes bad," a dealer at a primary dealership said. "That's why you can't carry any risk on the receiving side before the NFP (non-farm payrolls data)."

 

There was a lack of domestic cues on interest rates. Traders were closely tracking the Mumbai Interbank Outright Rate but the rise to 5.48% Thursday from 5.44% Wednesday did not lead to fresh paying in short-term OIS rates, dealers said. At an average overnight MIBOR fixing of 5.40%, swap rates reflected only a minority expectation of at least a 25-basis-point repo rate cut in December or February, they said.

 

"There are opportunities opening up in OIS but I am not sure which ones to take," a dealer at a private-sector bank.. "The next rate cut is hardly being priced in, but then the risk of that pricing being accurate is going up."

 

OUTLOOK

On Friday, swap rates are likely to track movements in US Treasury yields after the release of the long-awaited non-farm payrolls data for September, released after Indian market hours dealers said. There are no major cues scheduled on domestic interest rates until next week's September quarter GDP data release. 

 

US jobs data for September was released after Indian market hours and painted a mixed picture of the world's largest economy. The US added 119,000 jobs in September, higher than the consensus forecast of 51,000 additions. However, the unemployment rate edged up to 4.4% from 4.3% in August. The data has been delayed after the six-week US government shutdown was resolved only last week.

 

Traders will also track geopolitical developments, especially those related to the India-US trade deal. Most traders expect more clarity on this front by the month-end. By that time, GDP data for the September quarter will also be out. 

 

Traders will also track systemic liquidity and the overnight Mumbai Interbank Outright Rate, dealers said. Traders may continue to trade in swaps maturing in under a year to adjust their rate-cut bets and bet on spreads between MIBOR and money market rates. The RBI's announcement to conduct an INR-500-billion, variable rate repo auction Friday is likely to keep the repo rate and the MIBOR rate capped at 5.50%

 

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

 

	At 1700 IST	WEDNESDAY
1-year OIS	5.46%	5.45%
2-year OIS	5.46%	5.45%
5-year OIS	5.76%	5.73%
2-year MIFOR	5.85%	5.85%
5-year MIFOR	6.33%	6.32%

 

End

 

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

 

Edited by Akul Nishant Akhoury

 

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