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Informist, Tuesday, Mar. 10, 2026

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates tumbled Tuesday as Brent crude for delivery in May fell below $100 per barrel overnight, and subsequently the yield on the 10-year US Treasury note fell, dealers said. They said that some offshore traders received fixed rate contracts, along with domestic traders as rates – which had hit multi-year highs Monday – were at levels lucrative to receive fixed rates. However, the one-year OIS rate is still pricing in more than one rate hike of 25 basis points in the next 12 months as crude oil prices remain elevated and concerns about a rise in inflation linger, they said. 

 

The one-year swap rate ended at 5.72%, down from 5.84% Monday. The five-year OIS rate ended at 6.28%, down from 6.38% the previous session. The total notional trading volume of deals reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 594.25 billion, similar to INR 560.60 billion Monday. The one-year OIS rate and the five-year OIS rate fell 12 basis points and 10 bps, respectively, Tuesday, both recording the steepest fall in over 15 months. The one-year swap had risen 23 bps Monday, while the five-year swap had risen 16 bps. 

 

Crude prices fell after US President Donald Trump told CBS News, "I think the war is very complete, pretty much", and that the US was "very far ahead of schedule". Brent crude for May delivery fell to $91.18 a barrel at 1700 IST from $105.05 a barrel at the end of Indian market hours on Monday. Intraday Tuesday, Brent crude briefly fell below $90 per barrel. Tracking the fall, the 10-year US yield fell to 4.09% intraday from 4.18% at 1700 IST Monday. The yield inched higher to 4.13% at 1700 IST Tuesday. 

 

"Some offshore traders would've hit stop-losses on OIS today (Tuesday) which led to the fall," a dealer at a private sector bank said. "In the middle, OIS and G-sec reacted because (the 10-year) US yield had gone below 4.10%, and that was because crude had gone below $90 (per barrel) but now, crude and US yields are both up again." The five-year OIS was at 6.27% at the day's low. 

 

However, fears of elevated crude oil prices stoking inflation persisted, along with concerns of further escalation in the Israeli-American military conflict against Iran. The one-year swap rate is still pricing in more than one rate hike of 25 bps, dealers said. The rate was pricing in nearly three rate hikes of 25 bps each Monday. 

 

"Trump is so volatile, so I feel that while crude won't sustain at $120 (per barrel), it will surge once again. And then there's the fear that from $120 it can go to $150 also," a dealer at another private sector bank said. "Even if crude oil prices come down, they're not going to come back to $65-$70 a barrel like it was before. So, in the long term, that's definitely inflationary."

 

OUTLOOK

As has been the trend the past week, on Wednesday, traders will focus on offshore developments to determine the movement of OIS rates, especially the movement of crude oil prices and US Treasury yields. Developments in the West Asia conflict will be tracked. Post Indian market hours, US Defense Secretary Pete ‌Hegseth said Tuesday would be the most "intense day" in the US' military campaign in Iran so far. Oil prices are seen volatile in the near term as conflicting statements from various political and defence personnel leave uncertainty of when the West Asia war will end. 

 

The five-year swap could rise to 6.55-6.62% if Brent crude oil once again rises to $120 per barrel and upwards. If crude oil futures fall back to around $80 a barrel, the five-year swap could fall to 6.15%, dealers said. 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 RBI, both on-screen and via auction, dealers said. Swap rates maturing in up to one year may rise more than longer-term swaps as traders begin to advance their rate hike bets on fears of inflation rising. On the domestic front, the RBI is seen providing ample liquidity to the banking system for transmission of its monetary policy. Significant movement in the rupee may also lend direction, dealers said. The one-year swap rate is seen at 5.62-5.90% and the five-year at 6.15-6.55%.

 

	At 1700 IST	MONDAY
1-year OIS	5.72%	5.84%
2-year OIS	5.91%	6.02%
5-year OIS	6.28%	6.38%
2-year MIFOR	6.32%	6.42%
5-year MIFOR	6.71%	6.82%

 

End

 

US$1 = INR 91.8050

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

 

Edited by Avishek Dutta

 

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