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Informist, Wednesday, Feb. 18, 2026

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates ended steady Wednesday, falling off the day's high in lacklustre trade. Offshore traders were largely on the sidelines, and a rise in US Treasury yields had put upward pressure on swaps earlier in the day, dealers said.  

 

The one-year swap rate ended at 5.50%, down from 5.51% the previous day. The five-year swap rate closed at 6.04%, unchanged from Tuesday. The total notional trading volume on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 279.45 billion, down from INR 461.00 billion Tuesday. 

 

The yield on the benchmark 10-year US Treasury note was 4.07% at 1700 IST, up from 4.03% at the same time Tuesday, ahead of the release of the minutes of the US Federal Open Market Committee's January meeting, due 0030 IST Thursday. Swaps opened higher, tracking the rise in US yields. The five-year OIS rate rose to a day's high of 6.06%, after failing to fall to the much-awaited 6.00% level. The rate had hit 6.01%, the lowest in around a month, both on Monday and Tuesday. Traders now expect the swap rate to rise again to 6.08-6.10%, at which domestic traders will step in to receive fixed rates, dealers said. 

 

"We're seeing a reversal in all three segments," a dealer at a private sector bank said. "The US 10-year (US Treasury yield) is back above 4.05%. It didn't hit 4.00%. The five-year OIS is up from 6.00% and the 10-year (6.48%, 2035) bond (gilt yield) has risen from 6.65%."

 

Earlier in the session, some traders likely paid fixed-rate contracts in overnight indexed swap rates to hedge their underwriting of bond forward rate agreements in long-term gilts, dealers said. The government will sell INR 130 billion of the 7.24%, 2055 bond at the weekly gilt auction Friday, along with two other gilts. Demand for the 2055 bond is seen firm from long-term investors, especially since it is the last auction of the bond in this financial year, dealers said. Swap rates had risen Tuesday, likely due to hedging of bond forward rate agreements, dealers had said. 

 

"In the morning, we heard something going around in the market that a FRA (bond forward rate agreement) was being paid (in swaps), but the movement doesn't show it. I don't think the size was too substantial," a trader at a primary dealership said. 

 

The turnover in the six-month swap was the highest amongst tenures. The rate ended steady at 5.38%. Traders likely squared off their positions in the swap, dealers said. The swap had seen the highest turnover amongst tenures twice last week as well.  

 

OUTLOOK
Financial markets administered by the Reserve Bank of India are shut Thursday for Shivaji Jayanti. On Friday, OIS rates may track movement in US Treasury yields after the release of the minutes of the US Federal Open Market Committee's January meeting, due at 0030 IST Thursday, dealers said. On the domestic front, swaps may also track the movement of Indian government bond yields after the result of the INR-330-billion gilt auction Friday, dealers said.

 

Traders expect swap rates to trade in a narrow range and remain on the lower side, as US Treasury yields have fallen considerably so far this month and the rupee has stabilised against the dollar.

 

While offshore traders may continue to receive fixed-rate contracts in swaps, the fall in short-term swap rates is seen as 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 await the release of India's GDP for Oct-Dec based on the new series and second advance estimate for FY26, which will be released by the statistics ministry on Feb. 27.

 

Traders may also track movement in 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	TUESDAY
1-year OIS	5.50%	5.51%
2-year OIS	5.62%	5.62%
5-year OIS	6.04%	6.04%
2-year MIFOR	5.98%	5.97%
5-year MIFOR	6.46%	6.46%

 

End

 

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

 

Edited by Saji George Titus

 

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