More Stories

Informist, Friday, Mar. 6, 2026

By Cassandra Carvalho

MUMBAI – Overnight indexed swap rates climbed Friday, tracking a surge in crude oil prices, as traders preferred to trim their positions in swaps instead of in government bonds, dealers said. The five-year OIS rate ended at its highest level in over a year, after rising above technical levels during the day's session. Increased US Treasury yields also weighed on swap rates.

The one-year swap rate ended at 5.61%, the highest since May 19 and up from 5.55% Thursday. The five-year OIS rate ended at 6.22%, the highest since Jan. 20, 2025, and up from 6.10% the previous session. The five-year OIS rate rose to the day's high of 6.23%, marking a 13-basis-point rise Friday, the biggest intraday jump since May 8. The total notional trading volume of deals reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 629.45 billion, similar to daily turnovers seen during the week. The yield on the benchmark 10-year US Treasury yield was 4.15% at 1700 IST Friday, up from 4.12% at the same time Thursday.

"Once 5-year (OIS) broke the technical level of 6.12%, we have only seen an upward climb because traders can't short in G-sec (government securities) because of RBI, so people are cutting in OIS," a dealer at a private-sector bank said.

The Reserve Bank of India is likely to have purchased a hefty amount of gilts on screen this week as well, cushioning any fall in prices from a rise in crude oil prices and US yields. Traders who had gone short were forced to cover their short sales as the central bank can buy gilts on screen at any moment. Data released Friday showed the central bank had purchased government securities worth INR 99 billion in the secondary market in the week ended Feb. 27. As per data from the Clearing Corp. of India, the "Others" segment of bond market participants--which comprises insurance companies, provident funds, and the RBI--net purchased gilts worth INR 581.13 billion this week, including INR 107.68 billion Friday. Around 90% of these purchases are likely to have been made by the RBI itself, dealers said.

Given this situation, risk-off sentiment and fears of a spike in inflation with crude oil prices soaring on account of the military conflict in West Asia was transmitted excessively to swaps, dealers said. Brent crude for May delivery rose to $87.91 a barrel at 1700 IST from $83.17 a barrel at the end of Indian market hours Thursday.

"It (five-year OIS) is the natural rate now between 6.15-6.21%," a dealer at a state-owned bank said. "(Five-year OIS) rate falling below 6.20% is slightly difficult because you see US (yield) is up. Crude has also risen."

OUTLOOK

Swaps are not traded Saturdays. Monday, OIS rates may track the movement of crude oil prices after Brent crude for May delivery surged past $90 per barrel after Indian market hours. If the five-year swap rises above the 6.23% level, it could go as high as 6.35%--which would be the highest intraday level since January 2025. Any rise in swap rates may be partially offset as traders hedge their bond trades and OIS levels become lucrative to receive. Indian government bond yields are seen largely cushioned from the impact of the West Asia conflict due to purchases by the central bank, both on-screen and via auction. 

The 10-year US Treasury yield rose to 4.17% after Indian market hours. Non-farm payrolls in the US unexpectedly fell by 92,000 in February, against a Wall Street Journal poll estimate of a rise of 50,000. Swap rates maturing in up to one year may also rise in the near term as money market rates have been inching higher this month because of seasonally high demand for funds for tax payments and credit growth with the end of the March quarter near, dealers said. However, the rise may be limited as the RBI is seen providing ample liquidity to the banking system for transmission of its monetary policy. The RBI Friday announced INR 1-trillion, two-tranche open market operation auctions for next week. Significant movement in the rupee may also lend direction, dealers said. The one-year swap rate is seen at 5.55-5.70% and the five-year at 6.03-6.35%.

End

US$1 = INR 91.74

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

Edited by Rajeev Pai

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.