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Informist, Thursday, Apr. 9, 2026

By Janwee Prajapati

MUMBAI – Overnight indexed swap rates were higher Thursday as Brent crude oil prices rose with the ceasefire agreement between Iran and the US seen to be shaky, dealers said. Some traders took profits after swap rates fell sharply Wednesday, they said. Traders avoided large bets given the geopolitical uncertainty and ahead of India's CPI inflation data, due Monday.

The one-year swap rate ended at 5.86%, up slightly from 5.85% Wednesday, hitting a high of 5.89% during the day. The five-year OIS rate ended at 6.39%, up 8 basis points from the previous day. The total notional trading volume of deals reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 309.40 billion, only about 30% of the volume of trades recorded Wednesday.

Swap rates had slumped Wednesday after the US and Iran had agreed to a ceasefire but reversed some of the fall Thursday after Iran said a ceasefire was "unreasonable" after Israel continued bombing Lebanon Wednesday, saying the truce did not apply to that country. The Associated Press reported that Iran had closed the Strait of Hormuz again. US President Donald Trump Thursday said all US ships, aircraft, and ‌military personnel will stay in and around Iran until the country fully complies with the "real agreement".

The developments in West Asia resulted in crude oil prices rising again to nearly $100 per barrel. At 1700 IST, the June futures contract of Brent Crude was at $98.57 per barrel, up from $92.40 per barrel at the end of Indian trading hours Wednesday. At 1700 IST, the benchmark 10-year US Treasury yield was at 4.29%, from 4.24% at 1700 IST Wednesday.

"Traders are booking profit on their receiving positions because we (five-year swap rates) slumped to 6.35-6.36% from 6.85-6.87%," a dealer at a primary dealership said. "Also, with this news about Strait of Hormuz, ceasefire (between the US and Iran) seems very shaky."

Some traders considered the spread between the six-month swap rate and three-month swap rate attractive as it was still pricing in rate hikes, which were seen to have been pushed back by the Monetary Policy Committee's policy decision Wednesday, dealers said. Others hedged their bond holdings by paying the five-year swap rate after its recent fall.

While traders have pared bets of a rate hike in the first half of the current financial year, others expect the rate hike to come near the end of the calendar year. The one-year swap rate did not rise much Thursday as traders did not want to reassess their rate view just a day after the monetary policy decision, with the one-year swap rate already pricing in more than three rate hikes of 25 bps each in the next 12 months.

"I think one-year OIS is still pricing in four rate hikes this year," a dealer at a private-sector bank said. "Traders will wait for further clarity on the ongoing geopolitical tensions. Till then, I feel rates will remain elevated." 

The RBI Wednesday projected headline inflation at an average 4.6% in FY27. After more than a year of risks to inflation being "evenly balanced", Governor Sanjay Malhotra said they are on the upside again. Traders await CPI inflation for March, due Monday. The headline inflation is seen at 3.4%, according to an Informist Poll of 13 economists. A print closer to 4.0% will again spur bets of a quicker rate hike cycle, dealers said.

OUTLOOK

Swap rates will open Friday tracking crude oil price movement following overnight developments relating to West Asia, dealers said. There is concern about whether the ceasefire between the US and Iran will hold. Any significant movement in US Treasury yields will also lend cues to swap rates, dealers said.

Traders' attention is now on CPI inflation for March, due Monday, as it will provide some clarity on the impact of the rise in crude oil prices. Comments from the RBI's rate-setting panel had suggested the bar for rate hikes was higher than traders had earlier priced in, dealers said. 

The one-year swap rate is seen at 5.70-6.10% and the five-year swap at 6.30-6.80%.

End

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

Edited by Rajeev Pai

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