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Informist, Wednesday, Jan. 21, 2026

 

By Aaryan Khanna

 

NEW DELHI – Overnight indexed swap rates ended slightly lower Wednesday after rising for four straight sessions, taking cues from government bond and US Treasury yields easing. Traders also took the opportunity to book profits after swap rates had hit multi-month highs earlier this week, dealers said.

 

The one-year swap rate ended at 5.58%, from 5.59% Tuesday. The five-year swap rate closed at 6.08% against 6.10% the previous day. The total notional trade volume on Clearing Corp. of India Ltd.'s derivatives trading platform fell to INR 470.20 billion from INR 652.95 billion Tuesday.

 

"Offshore flows were not very large today (Wednesday)," a dealer at a foreign bank said. "People are a bit in wait-and-watch mode on what happens with US yields, since (US President Donald) Trump will be speaking at Davos today."

 

Trump is scheduled to speak at the World Economic Forum in Davos at 1900 IST Wednesday. Tensions between the US and Europe over the ownership of Greenland have led to a rise in US Treasury yields this week and geopolitics is expected to take centre stage in the speech. Ahead of the remarks, the 10-year US yield was at 4.28% at 1700 IST Wednesday from 4.30% at the same time Tuesday. 

 

Back home, the 10-year government bond yield also fell to 6.65% Wednesday from 6.67% Tuesday. The Reserve Bank of India is speculated to be buying bonds in the secondary market to cap gilt yields over the past few sessions, including on Wednesday. The 'others' segment of market participants, which includes the central bank, has net purchased gilts worth nearly INR 50 billion in the past two trading sessions, as per data from Clearing Corp. of India.

 

"That (speculation about RBI buying) has helped cool down the OIS rates also. As bond yields are going down, people are receiving the five-year OIS," a dealer at a private-sector bank said. "US Treasuries are also not going higher today and that 6.10% level (on the five-year OIS rate) has been holding since yesterday (Tuesday), so that has given comfort to the market."

 

The market's view on domestic interest rates remained unchanged despite the fall in OIS rates, dealers said. The RBI's Monetary Policy Committee is not expected to cut the repo rate any further from the current 5.25%. The rate-setting panel cut its policy rate by 125 basis points between February and December 2025. Its next move on the repo rate is seen as a hike by market participants, though this is only expected in 2027.

 

The fall in the rupee to a record intraday low of 91.7425 per dollar and a closing low of 91.6950 per dollar did not impact the swap rates. However, the persistent fall in forward premiums due to the RBI's intervention and the consequent decline in the Mumbai Interbank Forward Outright Rate over the past two days helped pull down OIS rates as well, dealers said.

 

OUTLOOK

On Thursday, OIS rates may take cues from overnight movements in US Treasury yields amid a lack of domestic interest rate triggers, dealers said. US President Donald Trump's scheduled remarks at the World Economic Forum in Davos around 1900 IST Wednesday will be closely watched.

 

Traders are uncertain about the direction of OIS rates, especially after the five-year OIS rose past the key 6.05% level Monday. With most traders not betting on any further rate cuts in India, benchmark OIS rates may continue to rise to fresh multi-month highs, dealers said. The RBI's Monetary Policy Committee is expected to next take action on the repo rate by raising it in 2027.

 

Domestic traders are expected to pay fixed rates below the 6.05% rate on the five-year swap. However, others may unwind their paid fixed-rate bets at a profit, capping the rise. The five-year OIS rate is expected to trade in the 6.03-6.20% range in the near-term amid heightened geopolitical uncertainty and a rise in US yields. 

 

Traders will also monitor developments in the India-US trade negotiations, crude oil prices, and further geopolitical developments. On Thursday, the one-year swap rate is seen at 5.48-5.62% and the five-year at 5.95-6.12%.

 

	At 1700 IST	TUESDAY
1-year OIS	5.58%	5.59%
2-year OIS	5.69%	5.71%
5-year OIS	6.08%	6.10%
2-year MIFOR	6.18%	6.22%
5-year MIFOR	6.55%	6.57%

 

End

 

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

 

Edited by Saji George Titus

 

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