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Informist, Tuesday, Feb. 17, 2026

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates inched up Tuesday as offshore traders were largely on the sidelines and domestic traders took the opportunity to pay fixed rates as the five-year OIS rate neared the key 6.00% level.

 

The one-year swap rate ended at 5.51%, up from 5.49% the previous day. The five-year swap rate closed at 6.04%, up from 6.03% Monday. The total notional trading volume on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 461.00 billion, higher than INR 375.35 billion Monday. The yield on the benchmark 10-year US Treasury note was 4.03% at 1700 IST, down from 4.05% at the same time Monday. US financial markets were shut on Monday for Presidents' Day.

 

"The 6.01% level is being well-protected; we saw a similar move when it (the five-year OIS) was on the upside (at 6.17%), so its but natural that we see the same when it's on the downside," a dealer at a private sector bank said.

 

Swap rates opened the day lower tracking a fall in US Treasury yields, dealers said. Some traders were expecting the five-year OIS rate to fall to the key 6.00% level Tuesday itself. However, offshore traders were not as aggressive in receiving fixed rates as was seen Monday, dealers said. The five-year OIS hit the day's low of 6.01% but reversed the fall later in the session.

 

On the domestic front, systemic liquidity fell Monday, and traders expect the fall to continue and overnight borrowing rates to rise. Some traders paid fixed rate contracts to hedge their bond purchases, dealers said. Prices of short-term gilts rose Tuesday on speculation that the Reserve Bank of India could conduct a gilt switch auction in the remainder of the ongoing financial year itself to reduce the Centre's gross borrowing for 2026-27 (Apr-Mar). Some banks received calls from the RBI inquiring about the feasibility about conducting more auctions to switch government bonds in FY26, Informist reported Tuesday, quoting dealers. The central bank sought feedback on which bonds to include in the auctions. A switch operation entails replacing a security maturing in the near term with a longer-maturity paper, effectively postponing the government's debt repayment.

 

"Today's paying looks like for some bond forward hedging," a dealer at a state-owned bank said. "But yes, some purchases by mutual funds in the SLR side and these are good levels to pay and hedge."

 

According to latest data, the net liquidity absorbed from the banking system by the RBI -- a proxy for the liquidity surplus -- was INR 2.59 trillion Monday, down from INR 3.18 trillion Sunday.

 

OUTLOOK
On Wednesday, OIS rates may track the movement of US Treasury yields ahead of the minutes of the US Federal Open Market Committee's January meeting, due at 0030 IST Thursday, dealers said. Traders are betting on the 10-year US yield falling to 4.00% or lower, which could lead to the five-year OIS rate falling to 6.00% or lower.

 

While offshore traders may continue to receive fixed rate contracts in swaps, the fall in short-term swap rates is seen limited as traders expect the Overnight Mumbai Interbank Outright Rate to rise in the near term, dealers said. After India's CPI inflation data for January, the RBI's Monetary Policy Committee is now seen holding the policy repo rate at 5.25% through FY27, dealers said.

 

Traders may also track the movement of crude oil prices and the rupee against the dollar. The one-year swap rate is seen at 5.40-5.55% and the five-year at 5.95-6.15%.

 

	At 1700 IST	MONDAY
1-year OIS	5.51%	5.49%
2-year OIS	5.62%	5.60%
5-year OIS	6.04%	6.03%
2-year MIFOR	5.97%	5.98%
5-year MIFOR	6.46%	6.47%

 

End

 

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

 

Edited by Ashish Shirke

 

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