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Informist, Thursday, Apr. 23, 2026

 

By Aaryan Khanna

 

NEW DELHI – Overnight indexed swap rates ended sharply higher Thursday as Brent crude futures for June delivery rose past the crucial $100-a-barrel mark. Though rate hike views were little changed, traders sought to hedge their underlying bond holdings by paying fixed rates, dealers said. The minutes of the Reserve Bank of India's Monetary Policy Committee were in line with market expectations and did not lend significant direction to OIS rates, they said.

 

The one-year swap rate ended at 5.90%, up from 5.83% Wednesday. The five-year OIS rate ended at 6.49%, up from 6.43% the previous day. The total notional trading volume of deals reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 623.10 billion, sharply up from INR 414.25 billion Wednesday.

 

The ceasefire between the US and Iran has been unilaterally extended indefinitely by US President Donald Trump past the Wednesday deadline, but the lack of negotiations and a peace deal on the simmering conflict kept traders worried about an outbreak of hostilities. Comments from both sides suggested neither wanted to engage in an all-out war as they had done in March. At the same time, the Strait of Hormuz effectively remained shut, pushing up prices of crude oil and other commodities. Tehran has seized two ships looking to cross the key waterway on Wednesday without coordinating with its military, while the US has also attacked two Iranian vessels during its blockade of the Strait.

 

"How can you stop people from hedging? Until the negotiations take place and a deal is signed, the market has a sword hanging over its head," a dealer at a primary dealership said. 

 

Brent crude futures for June delivery rose to $102.97 a barrel at 1700 IST, up from $99.38 a barrel at the end of Indian market hours Wednesday, rising past the crucial $100-a-barrel mark after two weeks of the ceasefire. Meanwhile, the 10-year US Treasury yield rose to 4.33% on Thursday from 4.27% at the end of Indian market hours Wednesday.

 

The minutes of the latest MPC meeting, released after market hours Wednesday, showed increased caution from policymakers in line with their decision to hold the repo rate at 5.25% and policy stance at 'neutral'. Dealers said MPC members did not seem inclined to take action on rates in April but their hands may be forced if the conflict continues until the next domestic policy review in June. The backward looking comments also had little impact on traders' views on domestic rate actions in 2026-27 (Apr-Mar), they said. Most market participants considered the remarks to be well balanced, though a few traders said the discussion of a rate hike in April itself was a sign of potentially tighter monetary policy soon.

 

Already, the one-year OIS rate had priced in three rate hikes of 25 basis points each in the current financial year. Traders said the paying pressure in OIS rates Thursday was led by domestic banks to hedge their bond portfolios rather than a view on more rate hikes. A weakness in the rupee also led to some paying interest from traders in the two- to five-year segments, dealers said. The domestic unit has tumbled 1% over the past three sessions and ended at 94.1050 a dollar Thursday, its lowest closing level in April.

 

"Looks like onshore (traders) are paying in OIS," a dealer at a private-sector bank said. "Heard some offshore (traders), but quite limited." Offshore traders paid fixed rates early in the day in line with other Asian economies as crude prices rose, dealers said.

 

OUTLOOK

On Friday, traders will track developments in West Asia and their impact on crude oil prices, with no interest rate cues scheduled domestically, dealers said. The one-year swap rate already prices in three 25-bps repo rate hikes by April next year, which will bring the repo rate to 6.00%. Some traders were looking to receive fixed rates as they believed the MPC will not raise the repo rate that much unless the West Asia conflict drags on, dealers said.

 

Some traders also looked ahead to the rate decision and commentary from the US Federal Open Market Committee at next week's policy meeting, which may influence offshore activity in India's OIS market. Dealers expect the US rate-setting panel to hold interest rates steady. Fed fund futures are pricing in no change to the federal funds rate next week as inflation in the world's largest economy remains sticky, according to the CME FedWatch tool.

 

On Friday, the one-year swap rate is seen at 5.60-6.00% and the five-year swap at 6.25-6.60%.

 

	At 1700 IST	WEDNESDAY
1-year OIS	5.90%	5.83%
2-year OIS	6.11%	6.04%
5-year OIS	6.49%	6.43%
2-year MIFOR	6.71%	6.64%
5-year MIFOR	7.04%	6.96%

 

End

 

US$1 = INR 94.11

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

 

Edited by Tanima Banerjee

 

 

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