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Informist, Friday, Jan. 23, 2026

 

By Aaryan Khanna

 

NEW DELHI – Overnight indexed swap rates ended at multi-month highs on Friday due to offshore traders consistently paying fixed rates. Domestic traders had received rates earlier in the day but were not aggressive after the five-year OIS rate topped the psychologically crucial 6.11% mark, dealers said.

 

The one-year swap rate ended at 5.60%, its highest closing level since May 30 and up from 5.57% Thursday. The five-year swap rate closed at 6.14% against 6.09% the previous day. This is its highest closing level since Feb. 13. The total notional trade volume on Clearing Corp. of India Ltd.'s derivatives trading platform jumped to INR 724.90 billion from INR 395.95 billion Thursday.

 

"The paying was driven by offshore and foreign banks. It is a classic sign when two-year has a lot of volume that there is offshore activity," a dealer at a primary dealership said. "We are pretty sure these are model flows from large global funds as they are rebalancing their Asia risk, following the rise in rates in Japan and Korea."

 

The two-year swap saw notional traded volumes of INR 103.80 billion, higher than the one-year swap rate. It ended at 5.74%, its highest close since Apr. 3.

 

The market's view on domestic interest rates remained unchanged, dealers said. The Reserve Bank of India'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.

 

OUTLOOK

Swap rates are not traded Saturday. India's financial markets are shut Monday for Republic Day. On Tuesday, OIS rates may take cues from the movement in US Treasury yields due to lack of domestic interest rate triggers, dealers said. With most traders not betting on any further rate cuts in India, benchmark OIS rates may continue to rise, dealers said.

 

Some domestic traders have been unwinding paid fixed rate bets at a profit, while offshore traders are expected to continue paying fixed rates, dealers said. The Monetary Policy Committee is expected to next take action on the repo rate by raising it in 2027.

 

Traders will also monitor developments in the India-US trade negotiations, crude oil prices, and the global geopolitical situation. On Tuesday, the one-year swap rate is seen at 5.48-5.62% and the five-year at 6.03-6.20%.

 

	At 1700 IST	THURSDAY
1-year OIS	5.60%	5.57%
2-year OIS	5.74%	5.70%
5-year OIS	6.14%	6.09%
2-year MIFOR	6.13%	6.14%
5-year MIFOR	6.57%	6.55%

 

End

 

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

 

Edited by Ashish Shirke

 

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