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Informist, Wednesday, Mar. 25, 2026

By Janwee Prajapati

MUMBAI – Overnight indexed swap rates ended slightly lower on Wednesday, tracking a fall in Brent crude futures below the psychologically crucial level of $100 per barrel, dealers said. Reduced fears of domestic rate hikes and a fall in US Treasury yields also helped pull down swaps. However, persistent concerns about the war in West Asia limited the fall.

The one-year swap rate ended at 5.92%, slightly down from 5.95% on Tuesday. The five-year OIS rate ended at 6.49%, similar to 6.50% Tuesday. The total notional trading volume of deals reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 396.40 billion, almost half of INR 766.85 billion on Tuesday. Traders refrained from taking aggressive positions on caution ahead of Thursday's market holiday for Ram Navami.

US President Donald Trump reiterated Tuesday that US negotiators were holding discussions with top Iranian officials to agree on a ceasefire. Reuters reported that Iran has told the United Nations Security Council that "non-hostile vessels" may pass through the Strait of Hormuz if ‌they coordinate with Tehran's authorities. Brent crude futures for May delivery were at $97.97 a barrel at 1700 IST Wednesday, down from $101.73 per barrel at the end of Indian market hours Tuesday.

However, both Israel and Iran continued to strike each other. Various media reported the US was preparing to deploy troops to Iran, with the Wall Street Journal also reporting that Saudi Arabia has allowed the US military access to one of its bases, while the United Arab Emirates has closed an Iranian-owned hospital and club, indicating steps toward entering the war. 

"These are good levels to receive. In fact, these are very good levels to receive, I would say, but nobody wants to enter that trade," a dealer at a private-sector bank said. "Foreign banks and mutual funds are also unwinding their portfolios."    

Some mutual funds likely unwound their paid fixed-rate positions taken over the past week due to escalations in the war in West Asia, while other domestic investors paid fixed rates. Foreign investors continued to pay fixed rates, likely preferring safe-haven assets, dealers said. At 1700 IST, the benchmark 10-year US Treasury yield was 4.32%, down from 4.35% at 0900 IST and 4.37% at 1700 IST Tuesday. Intra-day, both the one- and five-year swap rates had risen above Tuesday's close, tracking a rise in Brent crude to $100 a barrel, but could not sustain the rise as crude prices eased. 

"Receiving should have come around 6.45% (on 5-year OIS), but technicals do not work in situations like this (the war in West Asia)," a dealer at another private-sector bank said. "Call it rational or irrational, but from the last two to three days, there is strong paying from both domestic and offshore.'

OUTLOOK

Swap rates are expected to decline on Friday if there is no escalation in the war in West Asia, dealers said. However, rates might rise later in the day if bond yields rise due to the state bond auction Friday. The market will be influenced by Brent crude oil prices, US Treasury yields, and the rupee's movement, along with developments in the West Asia conflict, dealers said.

If offshore funds continue paying fixed rates, the rate could reach 6.55-6.62%, dealers said. If crude oil drops to near $80 per barrel, the five-year swap could ease to 6.20% as a fall triggers stop-losses on paid fixed-rate positions. Some traders think rates will not revert to pre-war levels even if oil prices fall, dealers said. However, if the war in West Asia escalates, some traders expect the 5-year swap rate to rise to 7%, dealers said, citing fears of rate hikes in India.

The one-year swap rate is seen at 5.70-6.10% and the five-year at 6.30-6.65% on Friday.

End

US$1 = INR 93.98

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

Edited by Saji George Titus

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