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Informist, Friday, Mar. 20, 2026

By Janwee Prajapati

MUMBAI – Overnight indexed swap rates ended off highs Friday, after rising intraday tracking the rupee's fall to record lows and as crude oil prices inched higher during the day, dealers said. The swap rates rose also due to the rise in US Treasury yields. The five-year swap rate eased to the day's low near the end of the session as traders speculated that the Reserve Bank of India purchased government bonds in the secondary market, dealers said. Private-sector banks' asset and liability management desks continued to receive fixed rates at levels seen lucrative, they said.

After rising to 5.90% intraday, the one-year swap rate ended at 5.85%, up from 5.81% Wednesday. The five-year OIS rate ended at 6.41%, unchanged from Wednesday. The day's high on the five-year swap was 6.46% and the day's low was 6.39%. The total notional trading volume of deals reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 696.20 billion, against INR 497.35 billion Wednesday. The rupee fell to a record low of 93.7550 a dollar before settling at 93.7100, down 108 paise from its previous close of 92.6300. Money markets were shut Thursday for Gudi Padwa.

Swap rates rose as offshore participants paid fixed-rate contracts on bets of higher inflation due to oil supply disruptions stoking a quicker rate-hiking cycle, dealers said. At 1700 IST, Brent crude for May delivery rose to over $107 per barrel, up from $105 per barrel at the same time Wednesday--the close of Indian market hours.

Moreover, the US Federal Open Market Committee maintained its federal funds target range at 3.50-3.75% for the second straight meeting. The Fed also raised its 2026 inflation forecast. US Treasury yields rose as traders do not expect rate cuts in the US in the rest of 2026 due to concerns about elevated inflation amid the West Asia war, dealers said. At 1700 IST, the benchmark 10-year US Treasury yield was 4.30%, up from 4.18% at the same time Wednesday.

"It is crude rates that impacts OIS rates the most," a dealer at a private sector bank said. "If crude prices remain up, inflation will go up and (cause) hikes in repo rates."

Domestic participants received fixed-rate contracts as traders speculated that the central bank bought gilts in the secondary market near the end of the trading session, sending swap rates to the day's low. The yield on the 10-year benchmark 6.48%, 2035 bond closed at 6.74%, from a fresh FY26 high of 6.7792% hit earlier in the day.

"Whenever there is a war-like situation, offshore (participants) starts paying," a dealer at a primary dealership said. "They (offshore participants) go long on developed market securities and unwind their positions in emerging markets."

OUTLOOK

Swaps are not traded on Saturday. Monday, swap rates will track Brent crude oil prices for May delivery as the war in West Asia is set to enter its fourth week. Traders will also track the movement of US Treasury yields. Significant movement in the rupee may also lend direction, dealers said.

Swap rates will also track the movement of bond yields if the RBI purchases bonds in the secondary market, which will bring down bond yields, dealers said. A fall in bond yields will also soften swap rates, dealers said.

Depending on the movement of Brent crude oil prices, the five-year swap rate could rise to 6.55-6.62% if offshore funds continue to pay fixed rates, dealers said. However, on the technical front, 6.50% is seen as a lucrative level to receive, which could thereby limit a further rise. If crude oil futures fall back to around $80 a barrel, the five-year swap could ease to as low as 6.20% as stop-losses will be triggered on paid fixed-rate bets, dealers said.

"Now the (five-year OIS) rates are in a zone of 6.35%-6.50%, and it all depends on the geopolitical situation," a dealer at a primary dealership said. 

The one-year swap rate is seen at 5.62-6.00% and the five-year at 6.30-6.62% on Monday.

End

US$1 = INR 93.71

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

Edited by Ashish Shirke

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