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Informist, Monday, Apr. 27, 2026

By Aaryan Khanna and Cassandra Carvalho

MUMBAI – Overnight indexed swap rates ended off the day's high Monday as Brent crude oil futures eased towards the end of the OIS trade and domestic traders received fixed rate contracts, dealers said. Trade was thin as several dealers remained on the sidelines amid the uncertainty after peace talks between the US and Iran failed to take place over the weekend. 

The one-year swap rate ended at 5.88%, unchanged from Friday but off the day's high of 5.90%. The five-year OIS rate ended at 6.49% after hitting a high of 6.52% intraday. Friday it had closed at 6.47%. The total notional trading volume of deals reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 315.95 billion, down sharply from INR 526.20 billion Friday.

"There are no flows visible in OIS and volume is also on the lower side," a trader at a primary dealership said. "Broadly it is just tracking the intraday movement of the crude prices."

Brent crude oil futures for delivery in June were at $105.99 per barrel at 1700 IST, down from $106.48 at 0900 IST but up from $103.75 at the end of market hours Friday. Intraday, it had hit $108.50 per barrel--the highest level since Apr. 7. Consequently, US Treasury yields and swap rates inched higher. Crude oil prices eased briefly after a report from US-based media outlet Axios that Iran had sent the US a fresh proposal to open the Strait of Hormuz while postponing negotiations on a nuclear deal to a later stage. The report cited a US official and two other sources.

Offshore paying activity was subdued despite the rise in crude oil prices over the weekend as traders waited for fresh developments on the West Asia crisis, dealers said. Given the uncertainty over the actions of both the US and Iran, traders refrained from placing large bets on domestic interest rates, with some staying on the sidelines ahead of the US Federal Open Market Committee rate decision Wednesday, they said. But with the ceasefire between the belligerents holding and no further military action in oil-producing states around the Persian Gulf, traders do not expect Brent crude to immediately top the $120-a-barrel peak seen in March, they said.

Domestic banks and mutual funds also received the one- and five-year swap rate during the day on the view that the contracts were pricing in more rate hikes than the Reserve Bank of India's Monetary Policy Committee was likely to carry out in the financial year 2026-27 (Apr-Mar). Comments from members of the rate-setting panel, made both in the minutes of the April policy review and in media interactions thereafter, seemed sanguine, dealers said. The policymakers pointed out risks to both growth and inflation and did not indicate any hurry to raise rates, dealers said. The one-year OIS rate was already pricing in more than three repo rate hikes of 25 basis points each, making it a lucrative rate to receive for those with some risk appetite, they said.

"When there is no sustained offshore paying, domestic side starts to receive," a dealer at a private-sector bank said. "Plus, a lot of corporate entities are looking to raise bonds, so we could see such flow-based receiving this week that could keep OIS in a range, even if crude remains here."

OUTLOOK

On Tuesday, traders will track developments in the West Asia war and their impact on crude oil prices, as has been the case over the past two months, dealers said. Most dealers do not expect a breakthrough in negotiations overnight but expect Brent crude futures to remain below $110 a barrel, betting that the US and Iran will not return to armed conflict and will continue to abide by their ceasefire even as the Strait of Hormuz remains closed.

There are no interest rate cues scheduled domestically other than the Index of Industrial Production for March at 1600 IST Tuesday and swap rates will be sensitive to global developments, dealers said. Growth in India's industrial output is likely to have eased to 2.6% in March, the slowest pace in five months, according to an Informist Poll of 10 economists.

The one-year swap rate already prices in three 25-bp repo rate hikes by April next year, which will bring the repo rate to 6.00%. Some traders are looking to receive fixed rates with the view that the Monetary Policy Committee will not raise the repo rate that much unless the West Asia conflict drags on for several months, dealers said. However, most traders are likely to avoid view-based positions due to uncertainty on the war and the negotiations between the US and Iran, they said.

Some traders are also looking ahead to the rate decision and commentary from the US FOMC Wednesday, 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.

Tuesday, the one-year swap rate is seen at 5.78-6.00% and the five-year swap at 6.30-6.60%.

End

US$1 = INR 94.19

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

Edited by Rajeev Pai

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