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Informist, Tuesday, Jun. 2, 2026

 

By Cassandra Carvalho

 

MUMBAI – The 50-day moving average of the five-year overnight indexed swap has proven to be a good indicator of when to enter paid contracts in the most liquid tenure, as the rate has resisted a fall below this technical parameter for seven months, dealers said. After rising above the 50-day moving average in early November, the swap has tested a fall below at least four times, including Friday and Tuesday, before rising again. This has made these levels--or 'dips'--ideal to initiate paid fixed rate contracts, they said. 

 

"All the three (moving averages) are upward sloping but market doesn't go linearly. If there's a correction, (the moving average tells you) till what point can it get corrected. If the trend is upwards, you will look at these levels as entry points to re-enter paids. And this (Friday) was a weekly closing, so it gave a good confirmation that it's not broken yet," a dealer at a private sector bank said. The swap had ended at 6.61% Friday, off the day's low of 6.58%. On Tuesday, the swap ended at 6.60%, also after hitting the day's low of 6.58%.

 

The seven-month elevation of the five-year OIS above the 50-day moving average indicates an uptrend on the technical charts, dealers said. The swap rate has risen about 93 bps since the end of October. The swap had closed below the 50-day moving average on Feb. 27, but subsequently retraced the fall after the US and Iran exchanged strikes in the Gulf region. Most recently, the swap hit a 31-month high of 6.90% mid-May, before tumbling to around its 50-day simple moving average of about 6.59% Friday and once again resisted a fall below the average Tuesday. There is usually a retracement if the swap fails to fall below the moving average, dealers said. Some dealers expect this level to break Friday if the Reserve Bank of India's Monetary Policy Committee's decision is favourable, or if the US and Iran agree to a peace deal. The one-month swap rate is currently pricing in a 50% chance of a 25-bps repo rate hike Friday, while most traders do not expect a hike, dealers said. 

 

"50 DMA (50-day moving average) is something people are quoting given that its a level that hasn't been broken," a dealer at another private sector bank said. "Fundamentally, OIS is already pricing in the possibility of (rate) hikes but technically also, if this particular level is not broken, then the chart is in an upward trend."

 

The one-year OIS in comparison, has been above its 50-day moving average since early March. Traders usually refer to the 50-day moving average for a short-term trend on the charts, while the 100-day and 200-day moving averages provide a longer-term insight. In the case of five-year OIS, the 100-day and 200-day moving averages are much lower than the 50-day, at about 6.37% and 6.07% respectively.  End

 

Edited by Avishek Dutta

 

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