More Stories

Informist, Monday, Feb. 23, 2026

By Aaryan Khanna

NEW DELHI – Overnight indexed swap rates ended lower Monday as offshore traders unwound their paid fixed rate bets after building them on Friday due to rising geopolitical tensions ahead of the weekend, dealers said. Reserve Bank of India Governor Sanjay Malhotra's comments Monday on liquidity triggered a sharp fall in rates as traders bet on the overnight Mumbai Interbank Outright Rate – the floating leg of the swap contract – to remain below the repo rate of 5.25%.

The one-year swap rate ended at 5.49%, down from 5.52% Friday. The five-year OIS rate ended at 6.04%, compared with 6.10% Friday and 6.04% Wednesday. The total notional trading volume on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 240.50 billion, less than half of INR 517.70 billion Friday.

Swap rates had risen Friday due to rising geopolitical tensions between the US and Iran and a rise in crude oil prices, dealers said. However, Brent crude for April delivery was capped at $72 a barrel for most of Indian trading hours Monday, similar to Friday's settlement. Moreover, there was no escalation in hostilities over the weekend and the risk of an immediate war had been pulled back, dealers said. The two sides have agreed to talks on Thursday.

"The market was spooked Friday and had built up positions expecting geopolitics to flare up," a dealer at a primary dealership said. "Since nothing happened and risk assets have barely moved, everyone has come and unwound."

The trigger for the unwinding was also the RBI governor's remarks assuring surplus liquidity in the banking system, dealers said. Speaking at a press conference after the RBI's central board meeting, Malhotra reiterated that the central bank would be proactive and pre-emptive in providing liquidity and ensuring durable liquidity in the banking system, net of seasonal outflows, to ensure rate transmission across all money market instruments.

"Offshore guys have been receiving continuously and then OIS moved after the governor's comments," a dealer at a private-sector bank said. "Now it looks like the range (for the five-year) OIS has shrunk to 6.02-6.10%." The swap rate had risen to an over 12-month high of 6.2350% earlier this month.

Bets on a rate action by the RBI's Monetary Policy Committee in 2026-27 (Apr-Mar) remained scant. Traders expect the rate-setting panel to follow up its 125-basis-point repo rate cuts in 2025 with an extended pause in rates. The minutes of the MPC's meeting earlier this month, released after market hours Friday, suggested members were comfortable with the growth-inflation trajectory in India but did not seem inclined to cut rates further, dealers said.

The RBI's liquidity measures are likely to keep overnight rates below the repo rate, dealers said. Despite outflows for goods and services tax payments on Saturday and Monday, the overnight MIBOR rate has been below the policy repo rate of 5.25% since Feb. 2 and it was at 5.17% Monday.

OUTLOOK

On Tuesday, OIS rates may track movement in bond yields in India and the US. Traders are virtually unanimous in expecting a pause on rates in FY27 after members of the rate-setting panel said in the minutes of the February MPC meeting that they would continue to remain data-driven, dealers said.

Further developments on the US-Iran front will be watched closely. Significant movement in the rupee and crude oil prices may also lend cues, dealers said.

Traders also look ahead to the release of India's GDP data for Oct-Dec and the second advance estimate for FY26 growth at 1600 IST Friday. The data will be released under a new series with 2022-23 as the base year. India's annualised GDP growth is likely to have slowed to 7.5% in the December quarter from 8.2% in Jul-Sept, Bank of America Securities said in a note last week.

Traders expect the overnight Mumbai Interbank Outright Rate to remain at or below the repo rate of 5.25% in the near-term after RBI Governor Malhotra's comments assuring surplus liquidity, dealers said. The one-year swap rate is seen at 5.40-5.60% and the five-year at 5.95-6.20%.

End

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

Edited by Saji George Titus

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2026. All rights reserved.