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Informist, Wednesday, Apr. 29, 2026

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates ended off the day's highs Wednesday, as domestic traders, especially mutual funds, received fixed rates at levels seen as attractive, dealers said. Swaps climbed as offshore traders paid fixed rates tracking a rise in Brent crude oil prices to $115 per barrel, they said. 

The one-year swap rate ended at 5.99%, inching higher from 5.96% Tuesday, and off the day's high of 6.02%--the highest since Apr. 7 and above the key 6.00% level. The five-year OIS rate ended at 6.62%, up from 6.60% Tuesday, also off the day's high of 6.65%.

 

Brent crude oil futures for delivery in June were $114.64 per barrel at 1700 IST, up from $110.95 at 0900 IST, and $111.75 per barrel at the end of market hours the previous session. The yield on the 10-year US Treasury note was 4.36% at 1700 IST, largely steady from the same time Tuesday, ahead of the US Federal Open Market Committee's interest rate decision at 2330 IST.

 

"Mutual funds have seen some success playing the range, paying at lower levels and receiving at higher levels, over the last few weeks. That is continuing," a dealer at a private-sector bank said. "So there is a fair bit of resistance from the onshore side in pricing in more rate hikes than OIS is already reflecting."

 

The total notional trading volume of deals reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 797.37 billion, up from INR 693.95 billion Tuesday. The three-month swap rate recorded the highest volume among tenors, at INR 254.50 billion, as some traders began pricing in a rate hike by the Reserve Bank of India's Monetary Policy Committee as early as August. 

 

The one-year swap rate is pricing four to five rate hikes, dealers said. While traders are jittery about any rise in inflation in India due to elevated crude prices, recent commentary from Reserve Bank of India officials has indicated no urgency to hike the repo rate, making current swap rates lucrative for receiving fixed rates, dealers said. Mutual funds, which had paid fixed rates at the lower end of the recent trading range when the five-year OIS rate hit its lowest this month at 6.27%, chose to unwind their bets as rates rose.

 

"We hit a low of 6.32-6.33% (on the five-year swap rate) and since then OIS has moved 30 bps, sentiment has changed and currency is approaching 95," a dealer at a private sector bank said. "We need to see what the RBI does about currency by June, or else they will have to hike (the repo rate)." The rupee ended at 94.85 a dollar Wednesday, nearing the key 95-a-barrel mark.

 

OUTLOOK

On Thursday, traders will track crude oil prices and developments in the war in West Asia, now in its third month, dealers said. Traders will also watch US Treasury yields after the US Federal Open Market Committee's decision at 2330 IST and comments from US Federal Reserve Chair Jerome Powell, likely his final policy speech before his term ends next month. 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.

 

"This is the first (US FOMC) policy after the war, I expect the commentary will be similar to what others (other central banks) have said, second-order effects and such," a dealer at a foreign bank said. "People are already expecting the Fed to sound vigilant, but for Powell, since it's his last (policy), will he give too much forward guidance? Or will he leave it to the next (Fed Chair), is something to be seen." 

 

Domestically, traders also fear that, as voting for state Assembly elections ended Wednesday, the Centre may raise petrol and diesel prices to help oil marketing companies, which are making losses on retail sales. Traders are also tracking the liquidity surplus, which has reduced considerably from its high of INR 5.50 trillion seen earlier this month. 

 

Risk appetite may be lower Thursday ahead of the extended weekend. Indian financial markets are shut Friday for Maharashtra Day and Labour Day. Thursday, the one-year swap rate is seen at 5.80-6.15% and the five-year swap at 6.30-6.70%.

 

	At 1700 IST	TUESDAY
1-year OIS	5.99%	5.96%
2-year OIS	6.24%	6.22%
5-year OIS	6.62%	6.60%
2-year MIFOR	6.85%	6.80%
5-year MIFOR	7.18%	7.12%

 

End

 

US$1 = INR 94.85

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

 

With inputs from Aaryan Khanna

Edited by Saji George Titus

 

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