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Informist, Monday, Feb. 9, 2026

By Aaryan Khanna

MUMBAI – Overnight indexed swap rates ended steady after a volatile session. Though there were no fresh cues on interest rates Monday, offshore flows and the aftermath of the Reserve Bank of India's Monetary Policy Committee meeting continued to move swap rates, dealers said.

The one-year swap rate ended at 5.52% against 5.53% Friday. The five-year swap rate closed at 6.18% against 6.19% the previous day. The total notional trade volume on Clearing Corp. of India Ltd.'s derivatives trading platform fell to INR 543.37 billion against INR 698.00 billion Friday.

The rate decision Friday and commentary following that from RBI Governor Sanjay Malhotra suggested that further repo rate cuts were unlikely, which OIS rates had already priced in, dealers said. Some traders considered Malhotra's remarks on liquidity as a sign of consistent support by ensuring surplus liquidity in the banking system, after sustained deficits during Dec-Jan. They received fixed rates in swaps maturing in up to one year, dealers said.

The swap would also be extremely vulnerable in case the RBI announces a variable rate reverse repo operation in coming days to push up call money rates to near the policy repo rate of 5.25%, dealers said. The weighted average call rate Monday was 5.03%, while the weighted average triparty repo rate was 4.27%.

"The short-term swap rates have a good positive carry considering liquidity is really quite abundant right now," a dealer at a private-sector bank said. "Effectively, the level at which banks are getting money is less than 4.50%, the triparty repo rate, so it is favourable to deploy in short-term instruments everywhere – Treasury bills, short-term bonds and swaps."

The five-year OIS contract's notional traded volume topped INR 100 billion for the fifth straight session and it reversed an early rise. The benchmark swap rate fell to under 6.17%, from 6.23% earlier in the day. Offshore traders had aggressively paid fixed rates early in the day and after the flow ended, traders took the opportunity to receive fixed rates, which were near an 11-month high, dealers said.

"Everyone has the same story: offshore flows in the morning, then when they cooled, everything came down," a dealer at a primary dealership said. "Unfortunately no one really knows with these things, but there has been no strong paying pressure since the morning to take it (five-year swap rate) past 6.20%."

OUTLOOK

On Tuesday, OIS rates may open steady after the volatility following the monetary policy decision on Friday, dealers said. With no strong interest rate cues until Thursday, the release of CPI data for January, traders said volumes may be muted in the next two sessions after the recent volatility.

The MPC maintained a status quo on the repo rate at 5.25% and policy stance at "neutral", as expected. RBI Governor Sanjay Malhotra was seen hinting at a terminal repo rate at 5.25%, with the MPC likely to opt for a prolonged pause, dealers said. Traders expect overnight MIBOR fixings to remain near the policy repo rate going ahead.

Traders may also track movement in US Treasury yields, Indian government bond yields, crude oil prices and the rupee movement for direction on swap rates. The one-year swap rate is seen at 5.40-5.60% and the five-year at 6.05-6.28%.

End

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

Edited by Akul Nishant Akhoury

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