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Informist, Tuesday, Apr. 21, 2026

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates ended steady in dull trade Tuesday, with no significant flows on either side as traders stayed on the sidelines, waiting to see the outcome of the probable second round of talks between the US and Iran, dealers said. Intraday, traders tracked developments on the proposed talks and the movement of crude oil prices, they said.

 

The one-year swap rate ended at 5.78%, unchanged from Monday. The five-year OIS rate ended at 6.36%, from 6.35% Monday. The Brent Crude futures contract for delivery in June was at $95.02 per barrel at 1700 IST, little changed from $94.96 at 0900 IST and $95.13 at 1700 IST Monday. Swaps dipped slightly when Brent Crude briefly fell below $94 per barrel intraday, dealers said.

 

"It's a very quiet day in terms of trade and sometimes it's better to let the market float," a dealer at a primary dealership said. "There is hardly anything happening today. Despite all the headlines, crude is not moving and that is the mother curve for India's rates--until we see it take a direction, traders are happy to stay where they are."

 

In the latest developments, Al Jazeera reported, citing Pakistani officials, that high-level delegations from Iran and the US have not arrived in Islamabad yet, but support staff have arrived over the past few days. US forces boarded a sanctioned tanker overnight in the Indo-Pacific region in an attempt to disrupt vessels helping Iran, as per the Pentagon.

 

The total notional trading volume of deals reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 208.45 billion, even lower than INR 335.55 billion recorded Monday after a sharp fall from INR 616.25 billion Friday. There was barely any activity from offshore players, and onshore traders have already built positions in swaps, with some heavily received positions in swaps maturing in under a year, dealers said. Traders estimate that the Reserve Bank of India is comfortable with a liquidity surplus of around INR 3.00 trillion and expect the overnight Mumbai Interbank Outright Rate to be set below the repo rate till the end of May, dealers said, making it lucrative to receive short-term swaps. The overnight MIBOR was set at 5.18% Tuesday, inching higher from 5.13% Monday amid outflows for goods and services tax payments.

 

Some traders still believe swaps are excessively pricing in rate hikes, a view that was reinforced after comments from RBI Governor Sanjay Malhotra. In a speech Saturday, which was published late Monday, he said monetary policy should use its influence on inflation expectations to prevent "entrenchment" of supply shocks in prices rather than outrightly suppressing demand in times of uncertainty such as the current period with a conflict smouldering in West Asia. Traders believe the RBI's Monetary Policy Committee is unlikely to begin raising interest rates at least until the end of the calendar year. 

 

Intraday, swaps also tracked the movement of US Treasury yields and UK gilt yields, dealers said. The yield on the benchmark 10-year US Treasury note was 4.26% at 1700 IST, the same as at 0900 IST and little changed from 4.27% at 1700 IST Monday.    

 

"We are just a news-flow-driven market right now, one level (of elevated crude oil prices and the West Asia war) is already priced in," a dealer at a mutual fund said. "Once the talks get concluded, we have to see if there's no deal at all on the table or if the Strait remains shut, or if things cool off."

 

OUTLOOK

On Wednesday, traders will track developments relating to the likely peace talks between the US and Iran in Islamabad and their impact on crude oil prices. While West Asia is currently dominating traders' minds, they may also track the movement of US Treasury yields after Kevin Warsh--the US Federal Reserve's potential next chair--faces the Senate for his confirmation hearing overnight. 

 

Wednesday, traders will also track the minutes of the RBI's Monetary Policy Committee's April meeting. They expect the members to have opted for a cautious, neutral tone, with no dissenting opinion. Traders will also look for commentary on liquidity in the minutes. Even as outflows of around INR 1.80 trillion began Monday for GST payments, liquidity is seen to be still ample, and overnight rates are likely to be below the repo rate this month, dealers said.

 

Later in the month, traders will await the US Federal Open Market Committee's interest rate decision, commentary by Fed Chair Jerome Powell, and clarity on his successor. Powell's term ends in May. Fed fund futures are pricing in a status quo in the federal funds rate next week as inflation in the world's largest economy remains sticky. 

 

The one-year swap rate is already pricing in three repo rate hikes of 25 basis points each to 6.00% by April 2027. Some traders are of the view that the Monetary Policy Committee will not raise the repo rate so much unless the West Asia conflict is extended and so they may receive fixed rates, dealers said.

 

On Wednesday, the one-year swap rate is seen at 5.50-6.00% and the five-year swap at 6.15-6.50%.

 

	At 1700 IST	MONDAY
1-year OIS	5.78%	5.78%
2-year OIS	5.98%	5.98%
5-year OIS	6.36%	6.35%
2-year MIFOR	6.63%	6.65%
5-year MIFOR	6.91%	6.94%

 

End

 

US$1 = INR 93.50

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

 

With inputs from Aaryan Khanna

Edited by Rajeev Pai

 

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