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Informist, Tuesday, Apr. 28, 2026

By Cassandra Carvalho

MUMBAI – Overnight indexed swap rates ended up Tuesday, with the one-year and five-year swaps ending at the highest level in three weeks as Brent crude oil futures for delivery in June rose above $110 per barrel--also the highest in around three weeks, dealers said. Several traders were not expecting Brent to rise past $110 per barrel as the ceasefire between the US and Iran has largely held. However, the Strait of Hormuz remains shut and supply of oil is decreasing, spurring a rise in oil prices, dealers said. 

The one-year swap rate ended at 5.96%, compared to 5.88% Monday, rising 9 basis points, the most in a day since Apr. 2. The five-year OIS rate ended at 6.60% from 6.49% Monday, up 11 bps, the most in a day since Mar. 30. The total notional trading volume of deals reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 693.95 billion, more than double from INR 315.95 billion Monday.

"Four to five rate hikes are back into (one-year) OIS, and offshore paying has re-started. If crude continues like this, the only thing to see now is whether there will be a June hike or not, because RBI won't be able to ignore this (rise in crude)," a dealer at a corporate said. 

Brent crude oil futures for delivery in June were at $111.75 per barrel at 1700 IST--the highest level since Apr. 7--and were up significantly from $105.99 per barrel at the end of gilt market hours Monday. The yield on the 10-year US Treasury note rose to 4.37% at 1700 IST from 4.31% at the same time Monday.

Offshore traders paid fixed rates tracking the rise in crude prices and US yields, which aided a rise in trade volume, dealers said. Several domestic dealers were on the sidelines as uncertainty about when the Strait of Hormuz would reopen continued with no peace deal between the US and Iran in sight, they said. Some mutual funds received fixed rates, they said. 

"The market has learnt from the previous rate hike cycle (in 2022) when it was slow to react. Now the reaction has happened very quickly," a dealer at a foreign bank said. "But people are not going overboard like we did last time – the terminal (repo) rate pricing has gone to 6.50% right now, when in 2022 it was going to crazy levels like 7.50% and 8.00%. I don't think traders have an appetite to drive up OIS rates much more right now as the MPC seems like it wants to look through the pressure."

Recent commentary from members of the Reserve Bank of India's Monetary Policy Committee has indicated no urgency to hike the repo rate, but some dealers expect a rate hike in Aug-Dec, as the West Asia war enters its third month by end of this week, they said.

Short-term swap rates also rose as the overnight Mumbai Interbank Outright Rate inched higher, as mutual funds turned borrowers in overnight markets amid month-end redemptions, dealers said. The overnight MIBOR was set at 5.19% Tuesday from 5.14% the previous session. 

OUTLOOK

On Wednesday, 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. Domestically, traders also fear that after state Assembly elections end this week, the Centre may raise prices of retail petrol and diesel as reserves deplete and it has to bear the cost of high crude prices. In May, bond yields are also seen rising as net supply increases and as traders begin pricing in higher inflation if the war continues, they said.

Some traders are also looking ahead to the rate decision and commentary from the US Federal Open Market Committee 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 this week as inflation in the world's largest economy remains sticky, according to the CME FedWatch tool.

Wednesday, the one-year swap rate is seen at 5.80-6.15% and the five-year swap at 6.30-6.70%.

End

US$1 = INR 94.54

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

With inputs from Aaryan Khanna

Edited by Tanima Banerjee

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