India IRS Review
Rise tracking gilt yields; 5-year OIS rate touches 6.00%
This story was originally published at 21:24 IST on 14 January 2026
Register to read our real-time news.Informist, Wednesday, Jan. 14, 2026
By Aaryan Khanna
NEW DELHI – Overnight indexed swap rates rose tracking government bond yields on Wednesday, dealers said. Traders also paid fixed rates betting that the Reserve Bank of India's Monetary Policy Committee would not ease monetary policy in a hurry, especially with uncertainty about the geopolitical situation across the world and the US Federal Reserve's independence.
The one-year swap rate ended at 5.51%, flat from Tuesday. The five-year swap rate ended at 5.99%, up from 5.96% at the end of the previous session. The total notional trade volume on Clearing Corp. of India Ltd.'s derivatives trading platform rose to INR 408.75 billion from INR 245.05 billion Monday.
The 10-year gilt yield rose to the psychologically crucial 6.65% level Wednesday from 6.63% Tuesday due to short sales before the weekly gilt auction Friday and continued disappointment over lack of India's inclusion in Bloomberg's Global Aggregate Index this week. Traders also placed bets that the five-year OIS rate would go beyond 6.00%, triggering stop-losses and proving a profitable trade, dealers said. The five-year contract hit 6.00% Wednesday, which it last hit on Dec. 23 and before that in March last year.
"Traders are just taking the opportunity to punt on the five-year (OIS) breaking the range since there doesn't seem to be any trigger that will cap swap rates on the domestic side at least," a dealer at a private-sector bank said. "Yes, there is a strong resistance there (at 6.00% on the five-year contract) but the market is not looking at any sort of policy easing in India right now."
The geopolitical volatility also led to traders hedging their bond holdings and pay fixed rates, dealers said. Brent crude oil for March delivery has risen nearly 8% since Thursday due to increased unrest in Iran and US President Donald Trump's comments that the world's largest economy and military would intervene in the political protests taking place in the oil-producing nation.
A fall in US Treasury yields capped the upward swing in the five-year OIS rate, with traders also unwinding their paid fixed rate bets near the key 6.00% level at a profit, dealers said. The 10-year US Treasury yield was at 4.16% at 1700 IST Wednesday from 4.20% at the end of Indian market hours Tuesday as US CPI inflation for December was in line with expectations. Meanwhile, short-term swap rates did not move much due to lack of firm interest rate cues on the domestic front.
"It looks like the offshore market was a bit more active today (Wednesday), we heard a lot of receiving from them around 6.00%," a dealer at a primary dealership said. "As of now there is no clarity on which side the flows will go but the trend should be either here or higher."
OUTLOOK
India's financial markets are shut Thursday due to civic elections in Maharashtra. Swap rates may open steady Friday given the lack of firm interest rate triggers. Traders may pay fixed rates with the Bloomberg Global Aggregate index inclusion not imminent and some traders betting on the five-year OIS rate topping the key 6.00% mark, dealers said.
The movement in US Treasury yields may also lend cues. With the 10-year US yield in the 4.10-4.20% range it has held since early December, the overseas trigger may have limited impact on OIS rates, dealers said. Fed funds futures reflected a 97.2% chance of status quo on rates at the FOMC's January meeting, according to the CME's FedWatch tool.
Some traders are also eyeing the US Supreme Court's ruling on the legality of the tariffs levied by US President Trump, a decision which is likely Wednesday. Traders will also monitor developments in the India-US trade negotiations, crude oil prices, and further geopolitical developments. On Friday, the one-year swap rate is seen at 5.45-5.58% and the five-year at 5.91-6.05%.
At 1700 IST | TUESDAY | |
1-year OIS | 5.51% | 5.51% |
2-year OIS | 5.60% | 5.59% |
5-year OIS | 5.99% | 5.96% |
2-year MIFOR | 6.17% | 6.14% |
5-year MIFOR | 6.52% | 6.50% |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Ashish Shirke
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