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Informist, Wednesday, May 27, 2026

By Cassandra Carvalho

MUMBAI – Overnight indexed swap rates ended down Wednesday tracking an ease in crude oil prices and US Treasury yields, and optimism on the US and Iran nearing a peace deal, dealers said. Activity was mostly from onshore participants, they said.

The one-year swap rate fell to 6.10% from 6.14% Tuesday. The five-year OIS rate ended at 6.61% Wednesday, down from 6.63% the previous day. The swap rate hit a high of 6.65% during the day. The total notional trading volume reported on Clearing Corp. of India Ltd.'s derivatives trading platform fell to INR 540.35 billion from INR 623.45 billion Tuesday.

Brent crude oil futures for delivery in July were $97.04 per barrel at 1700 IST, similar to $97.97 per barrel at 0900 IST and inching lower from $98.73 per barrel at the close of swap market hours Tuesday. Brent had briefly climbed above $100 per barrel after Indian market hours Tuesday following Iran's warning of retaliation against US strikes. The yield on the 10-year US Treasury note was 4.48% at 1700 IST, down from 4.51% at the same time Tuesday.  

"We're hearing there are subdued transactions in the offshore (participants), only onshore transactions are there and they are receiving a lot at the 82-85 (6.85% on the five-year OIS) levels for their books, or they are cutting their positions," a dealer at a state-owned bank said. 

Along with geopolitical triggers, expectations that the Reserve Bank of India's Monetary Policy Committee's rate hike cycle will not be as aggressive as swap rates have priced in made current levels lucrative to receive fixed rates, dealers said. Mutual funds continued to lock in fixed rates in non-funded swaps while purchasing floating rate corporate bonds, they said. 

"It opened higher, but it's not able to sustain the rise. Banks' hedging has happened, investors have received, but it's a technical level here," a dealer at a private sector bank said. "Again people have started paying at around 6.60% (on five-year OIS), it's a good resistance and we have seen the curve bounce back from here a lot of times."

OUTLOOK

Indian financial markets will remain shut Thursday for Id-ul-Zuha. On Friday, swap rates will track developments in the war in West Asia and its impact on crude oil prices, dealers said. Post Indian market hours, near-month Brent crude oil futures fell below $95 per barrel after Iranian state media said a draft framework for a deal with the US included Tehran re-opening the Strait of Hormuz. A peace deal between the two countries is likely to drag down the one-year swap rate to 5.90% and the five-year OIS rate to 6.40%, dealers said. However, 6.40% on the five-year OIS is seen lucrative to pay fixed rates, limiting a fall in the rate, some dealers said. 

Traders will also track US Treasury yields after the release of a slew of economic data in the US, dealers said. Domestically, focus is on the MPC meeting outcome next week. Most traders expect the MPC to hold the repo rate steady while opting for a cautious, slightly-restrictive tone. Moreover, dealers hope that the central bank will announce measures to curb the rupee's depreciation, weakening the case for a policy repo rate hike. Some traders were also receiving swap rates Tuesday and Wednesday after the cut-off at the three-year, $5-billion dollar-rupee buy-sell swap auction was higher than expected. Some dealers expect more such auctions to be conducted. 

The movement in the rupee and overnight money market rates will also influence swaps. Friday, the one-year swap rate is seen at 5.90-6.40% and the five-year at 6.50-6.90%.

End

US$1 = INR 95.6900

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

Edited by Deepshikha Bhardwaj

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