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Informist, Thursday, Apr. 30, 2026

By Aaryan Khanna

NEW DELHI – Overnight indexed swap rates ended little changed from Wednesday's close despite significant intraday volatility, tracking crude oil prices, dealers said. After surging in early trade as Brent crude futures hit a four-year high, an intraday tumble in the benchmark led to swap rates also erasing the day's rise. 

The one-year swap rate ended at 6.00%, up from 5.99% on Wednesday. The one-year rate hit a high of 6.1250% intraday, its highest level since Apr. 7. The five-year OIS rate ended at 6.61%, down from 6.62% Wednesday after hitting an intraday high of 6.73%, the most since Apr. 6. The total notional trading volume of deals reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 656.75 billion, down from INR 797.37 billion Wednesday.

"No one is able to pinpoint the reason for it, but oil just collapsed (in the second half of the day)," a dealer at a private-sector bank said. "So already (the) domestic side was in a mood to receive and then the paying disappeared as it (Brent crude for June delivery) fell to below $120 (a barrel)."

Brent crude oil futures for June delivery were at $113.30 per barrel at 1700 IST, down from $121.35 at 0900 IST and $114.64 per barrel at the end of gilt market hours Wednesday. During the day, the contract reached $126.41 per barrel, its highest level since Mar. 9, 2022. With energy supply concerns mounting as US President Donald Trump threatened to blockade the Strait of Hormuz until a peace deal was reached with Iran, the risk of higher imported inflation led traders to pay fixed rates in the domestic swaps market, dealers said. Most traders eventually unwound those bets by the end of the day, they said.

An overnight rise in US Treasury yields prompted some offshore traders to pay fixed rates on two- to five-year contracts. While the US Federal Open Market Committee held its policy rate at 3.50-3.75%, as universally expected, three members voted to remove the "easing bias" in the policy statement. The 10-year US yield was at 4.40% at 1700 IST, down from 4.43% at 0900 IST but up from 4.36% at 1700 IST Wednesday.

Both these factors were seen making the case for tighter monetary policy in India at a time when the Reserve Bank of India has ensured surplus liquidity in the banking system and its Monetary Policy Committee members have flagged risks to both growth and inflation from the uncertainty in West Asia. However, the one-year swap rate was already pricing in four to five 25-basis-point repo rate hikes each Wednesday, and Thursday's high reflected a repo rate of 6.75% by April next year. This was considered highly unlikely by the market, dealers said.

Instead of taking repo rate cues from the one-year rate, traders said swap rates had risen as market participants were spooked by the rise in crude prices and cut their received positions. Some mutual funds, which had received fixed rates over the past few days, and banks looked to hedge their bond holdings as well, dealers said.

"The market has been volatile enough, but these levels are still pricing in a 6.50% repo rate in 12 months and a terminal repo rate near 7.50%," a dealer at a foreign bank said. "Over the past two days, offshore paying has not been very aggressive, and while it was there today, everything changed in the second half."

OUTLOOK

Money markets are shut Friday for Maharashtra Day and Labour Day. Over the long weekend, traders will track crude oil prices and developments in the war in West Asia, now in its third month, dealers said. Comments from RBI Governor Sanjay Malhotra at the Fixed Income Money Market and Derivatives Association of India annual meeting on Friday may also lend direction, they said. 

Domestically, traders also fear the Centre may raise petrol and diesel prices to help oil marketing companies, which are making losses on retail sales as crude oil prices have soared due to the war in West Asia, dealers said. If pump prices increase, CPI inflation is expected to rise towards the upper end of the RBI's tolerance band of 2-6% later in 2026-27 (Apr-Mar). Swap rates already price in several repo rate hikes in India in both FY27 and beyond.

Traders will also track the liquidity surplus, which has reduced considerably from its high of INR 5.50 trillion seen earlier this month. Monday, 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 94.91

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

Edited by Saji George Titus

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