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Informist, Friday, Feb. 27, 2026

By Cassandra Carvalho

MUMBAI – Most overnight indexed swap rates ended down Friday, and the five-year overnight indexed swap rate ended below the key 6.00% level for the first time since Jan. 14 tracking a fall in the benchmark 10-year US Treasury note below the psychologically crucial 4% level, dealers said.

The one-year swap rate ended at 5.48%, down from 5.50% Thursday. The five-year OIS rate ended at 5.99% against 6.06% Thursday. The total notional trading volume of deals reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 551.40 billion, up from INR 224.05 billion Thursday. At 1700 IST, the benchmark 10-year US Treasury yield was 3.99%, down from 4.05% at the same time Thursday. The 10-year US yield fell below 4.00% for the first time in three months.

Offshore traders heavily received fixed rates in swaps, especially in the five-year swap, tracking the fall in the 10-year US Treasury yield, dealers said. If the 10-year benchmark US yield sustains the fall and ends below the psychologically crucial 4.00% mark at the end of US market hours Friday, it will break a 200-week moving average and may lead to further downside in the US yields, dealers said. The 10-year US yield could fall to as low as 3.80% on the technical front, dealers said. A fall in US yields widens the interest rate differential between safe-haven assets and rates in emerging market instruments, making the latter more appealing to foreign investors. Some domestic traders hit stop-losses at the key 6.00% level, triggering a fall to the day's low of 5.9850%, dealers said.

"We're mainly seeing the fall because of receiving in the SOFR (Secured Overnight Financing Rate) curve," a dealer at a private sector bank said. "GDP was slightly less than expected, and the fall in G-sec (bond yields) is also affecting OIS."

Lower-than-expected GDP growth for Oct-Dec released at 1600 IST Friday triggered the fall below 6.00% nearing the end of trade. Traders had expected India's GDP growth to be near or above 8% due to a revision in the base year. Data released by the statistics ministry showed GDP growth for the December quarter was 7.8%. The lower-than-expected GDP growth led to a fall in bond yields and swap rates as it raised the possibility of further interest rate easing by the Reserve Bank of India's Monetary Policy Committee, dealers said.

 
The one-month swap rate ended at 5.33%, 13 basis points higher from Thursday's close, as traders bet on the Overnight Mumbai Interbank Outright Rate rising on the last day of the financial year 2025-26 (Apr-Mar). The swap matures on Apr. 2. The rise in the one-month swap is usual, and happens every year, dealers said. The swap rate had risen 9 bps on Feb. 28, 2025.

"The March-April turn applies today (Friday), you pay because March-end fixing will be higher," a dealer at another private sector bank said. "It happened every time we crossed the March-end (maturity). Last month-end we saw the paying in 2-month. But it depends on the duration to price it. If you expect last day of March fixing to be 1% higher, it'll be 5 bps in 2-mon (swap) and 10 bps in the one-month (swap)."

OUTLOOK

Swaps are not traded Saturdays. On Monday, OIS rates may track the movement in US Treasury yields after the release of US producer prices for January, dealers said. The data was released after Indian market hours Friday. Excluding food and energy, producer prices rose 0.8% on month against a Wall Street Journal poll of 0.3%.

Swap rates up to one year may rise in the near term since money market rates are seen rising, while the five-year OIS rate may trade in the 5.85% to 6.00% range, 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. The one-year swap rate is seen at 5.40-5.60% and the five-year at 5.85-6.08%.

End

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

Edited by Ashish Shirke

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