India IRS Review
Mixed; 5-year OIS rate off lows on profit taking
This story was originally published at 21:06 IST on 24 February 2026
Register to read our real-time news.Informist, Tuesday, Feb. 24, 2026
By Aaryan Khanna
NEW DELHI – Overnight indexed swap rates ended on a mixed note. The five-year swap rate ended off lows as traders unwound their received fixed rate bets at a profit, while most other tenures traded in a narrow band through the day, dealers said.
The one-year swap rate ended at 5.50%, up from 5.49% Monday. The five-year OIS rate ended at 6.03%, compared with 6.04% Monday after falling to a one-week low of 6.01% intraday. The total notional trading volume on Clearing Corp. of India Ltd.'s derivatives trading platform rose to INR 279.45 billion from INR 240.50 billion Monday.
Offshore traders continued to receive the five-year swap rate, as they did Monday, due to a fall in US Treasury yields, dealers said. At 1700 IST, the yield on the benchmark 10-year US Treasury yield was 4.04%, down from 4.08% at the same time Monday. US yields have declined over the past week after the US administration's tariffs were struck down by the US Supreme Court and there was uncertainty on further tariff announcements.
However, traders said that the five-year swap rate is unlikely to sustain below 6.00% and unwound their received bets at the day's low. With no bets on further domestic rate cuts and geopolitical uncertainty swirling, traders avoided receiving the five-year OIS rate below the psychologically crucial 6.02% mark, dealers said. Some traders also noted that a military flare-up in the escalating tensions between the US and Iran would hurt India among the most in the region due to a potential spike in oil prices. India is the world's second-largest oil importer.
"The five-year swap has come down substantially. Offshore receiving interest has also been there," a dealer at a foreign bank said. "But I'm not sure it is possible to play for more of a fall unless the geopolitical pressure clears up. Both oil and the dollar/rupee (exchange rate) jumping could suddenly change the outlook for inflation quite quickly."
Brent crude for April delivery traded at around $72 a barrel through Indian market hours, similar to Monday. The rupee threatened to weaken below 91 against the greenback before the RBI's intervention prevented the key level breaking, helping it to close only 0.1% lower at 90.95 a dollar Tuesday.
Dealers said that despite the minutes of the February meeting of the Monetary Policy Committee suggesting members are comfortable with the CPI inflation trajectory, traders are not betting on further repo rate cuts after the 125 basis-point reduction between February and December 2025. However, RBI Governor Sanjay Malhotra's reassurance Monday that liquidity would remain in surplus to ensure transmission of the rate cuts to all markets, including gilts, are seen keeping the overnight Mumbai Interbank Outright Rate below the repo rate of 5.25%.
"There's nothing to talk about in the front-end of the curve," a dealer at a primary dealership said. "Right now, the question is where do you price the (MIBOR) fixing to be, and because of that you'll have various scenarios that are going to be priced in from different sections of the market."
OUTLOOK
On Wednesday, OIS rates may track US Treasury yields amid lack of domestic cues. Traders do not expect much volatility in swap rates up to one year, while the five-year OIS rate may not fall below the psychologically crucial 6.00% mark without a firm trigger, dealers said.
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. 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 (Apr-Mar) as the base year. India's GDP growth is likely to have slowed to 7.5% on year in the December quarter, according to the median of an Informist poll. In Jul-Sept, GDP growth was 8.2% on year in the old series with the FY12 base year.
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 Monday 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%.
At 1700 IST | MONDAY | |
1-year OIS | 5.50% | 5.49% |
2-year OIS | 5.61% | 5.61% |
5-year OIS | 6.03% | 6.04% |
2-year MIFOR | 6.05% | 6.06% |
5-year MIFOR | 6.48% | 6.52% |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
US$1 = INR 90.95
Edited by Akul Nishant Akhoury
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