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Informist, Tuesday, Dec. 16, 2025

By Cassandra Carvalho

MUMBAI – Overnight indexed swap rates ended largely steady Tuesday due to lack of major triggers to determine the rate trajectory, dealers said. Traders were expecting the Reserve Bank of India's three-year dollar-rupee buy-sell swap auction Tuesday to lend cues to swap rates, but the result, which was along expected lines, failed to lend direction to the swaps market, dealers said. Caution before the release of US non-farm payrolls for November, which came out post market hours, also limited trade and volumes were low, they said. 

The one-year swap rate ended at 5.47%, against 5.46% Monday. The five-year swap rate ended at 5.90%, the same as Monday. The total notional trade volume on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 62.60 billion, sharply down from INR 290.20 billion Monday. The yield on the benchmark 10-year US Treasury note was 4.18% at 1700 IST, from 4.17% at the same time Monday. 

Trade volumes in swaps were low due to lack of significant domestic triggers on interest rates, and caution before the US data, as traders awaited cues on interest rate moves in the US.

"In India there's no rate scene at all, cut and all is all over," a dealer at a private sector bank said before the data release. "Now only thing left is if Fed cuts, and how much will he (US Federal Open Market Committee) cut. Some rumour going around that NFP can be 100k (100,000), someone else is saying it could be lower, let's see what the data shows."

Rescheduled data released post Indian market hours showed that the US non-farm payrolls rose by 64,000 in November, more than a Wall Street Journal poll estimate of 45,000. Non-farm payrolls in October fell by 105,000. The unemployment rate in the US rose to 4.6% last month, against a consensus estimate of 4.5%.

On the domestic front, traders largely dismissed the fall in the rupee past the key 91.00-per-dollar mark Tuesday. Instead, the focus was on dollar/rupee forward premiums, which rose sharply Monday. Traders also awaited the result of the RBI's three-year dollar-rupee buy-sell swap auction Tuesday, and were expecting to pay fixed rate contracts in swaps post the result, dealers said. However, the result was largely along expected lines. The central bank set a 765 paisa cut-off at the auction, slightly lower than an Informist poll estimate of 780 paise. Traders who had received the Mumbai Interbank Forward Offer Rate paid fixed rate contracts in swaps to hedge their bets, but only in light quantums, dealers said.   

"The most liquid market is MIBOR (Mumbai Interbank Offered Rate) and it (the swap auction result) has not impacted it. It has affected the bond MIFOR market but only very slightly," a dealer at a state-owned bank said. "Liquidity is also not impacting because market is not taking that into effect, market is not seeing a huge impact, there has been very less infusions."

The overnight MIBOR rate jumped 16 basis points to 5.46% Tuesday, from 5.30% Monday, as the overnight weighted average call money rate was 5.41%, above the RBI's repo rate and closer to the Marginal Standing Facility rate of 5.50%. Money market rates surged inspite the RBI's INR 1.52-trillion liquidity infusion through three variable rate repo auctions this week, due to outflows from the banking system for advance tax payments, dealers said.

OUTLOOK

On Wednesday, swaps may track the overnight movement in US Treasury yields after the release of US jobs data. Swaps may also track the rupee's movement against the dollar and its impact on dollar-rupee forward premiums. 

Offshore flows are likely to continue to drive movement in OIS rates amid lack of interest rate cues on the domestic front. Activity may continue to hold up this week but will decline in the Christmas week and heading into the New Year as offshore traders close their accounts at the year-end or go on holiday, dealers said.

On the domestic front, after India's CPI for November was largely a "non-event" for swaps, traders are more focused on the CPI prints January onwards, with the RBI projecting retail inflation to average 0.6% in the December quarter. India's GDP estimate for 2025-26 (Apr-Mar) in the first week of January may also be crucial for traders to take bets on further repo rate cuts by the Monetarty Policy Committee, dealers said. 

Traders will monitor developments around the India-US trade deal and may also track crude oil prices for cues. The one-year swap rate is seen at 5.40-5.55% and the five-year swap rate is seen at 5.78-6.02%.

End

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

Edited by Tanima Banerjee

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