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Informist, Monday, Jun. 8, 2026

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates gave up the day's gains to end steady on Monday as near-month Brent crude oil futures fell below $95 per barrel towards the end of trade after US President Donald Trump's comments that Israel and Iran were looking at an immediate ceasefire, and that peace talks were proceeding. Swaps had risen tracking a rise in oil prices over the weekend as Iran and Israel renewed strikes against each other. Offshore traders were also paying fixed rate contracts during the day, dealers said. 

 

The one-year swap rate ended at 6.05% Monday, against 6.04% Friday. The five-year OIS rate ended at 6.54%, the same as on Friday. The one-year swap was off the day's high of 6.07%, and the five-year swap rate was off the intraday high of 6.58%. 

 

"Could be just crude that's affecting because now the market is trending left again (getting received)," a dealer at a private sector bank said.

 

At 0903 IST, the 5-year OIS was traded at 6.0650% for INR 3.60 billion, about 47 basis points lower than its closing. This was an erroneous trade which is likely to be reversed, dealers said.  

 

"I think something will be done about this (erroneous trade) because the MTM will be very big at 50-60 bps below market," a dealer at a state-owned bank said. 

 

Brent crude oil futures for delivery in August fell to $94.47 per barrel at 1700 IST, from an intraday high of $98.08 per barrel and similar to $94.92 at 1700 IST Friday. The yield on the 10-year US Treasury note had risen to 4.58%, but eased to 4.55% by the end of market hours Monday, up from 4.48% at Friday's Indian market close. Swaps closely tracked the movement of these global triggers, with offshore triggers continuing to pay fixed rates as seen Friday, dealers said. Traders also accelerated bets of rate hikes by the US Federal Open Market Committee after non-farm payrolls in the US for May were more than double the consensus estimates, dealers said. 

 

As traders continue to price in rate hikes by the Reserve Bank of India's Monetary Policy Committee later this calendar year, after the rate-setting panel stood pat on rates Friday, close attention is on the trajectory of oil prices and its impact on inflation, dealers said. The rise in swaps was capped as some traders continued to receive fixed rate contracts to maximise their returns on investments in floating rate corporate bond issuances, dealers said. 

 

Traders were also cautious as they awaited the detailed directions on the RBI's facility to boost external commercial borrowings by public sector undertakings and concession on banks' hedging cost to raise fresh foreign-currency non-resident deposits; measures which RBI Governor Sanjay Malhotra had announced Friday. The measures are seen attracting foreign inflows of at least $40 billion, though estimates vary and a few traders do not expect such a large inflow to eventualise. 

 

OUTLOOK

On Tuesday, swap rates track crude oil prices and developments in the US-Iran peace negotiations. Swaps could tumble if a peace deal between the US and Iran is announced. However, traders will still price in a quicker rate cycle in India, likely to begin as early as August due to elevated oil prices and as monsoon is expected to be weak, stoking inflation, dealers said.

 

Traders expect the swap rate curve to steepen, as longer-term rates rise on high inflation but short-term rates will be anchored due to a likely liquidity boost once the RBI's measures to shore up capital kick in. Traders await the directions on the measures, especially to determine the concession on public sector undertakings' external commercial borrowing. 

 

Traders will also track any development on the inclusion of Indian government bonds on Bloomberg Index Services' flagship Global Aggregate Index after the RBI and the Centre Friday unveiled a slew of measures to improve foreign inflows, dealers said. Bloomberg, which deferred its decision on the inclusion of Indian bonds in January, said it plans to provide the next update on the potential inclusion by mid-2026. Most traders expect the review this month.

 

Traders await India's CPI inflation data for May, scheduled for Friday. Headline retail inflation is likely to have risen to a 16-month high of 4% in May, reaching the Reserve Bank of India's medium-term inflation target, according to the median in an Informist Poll of 12 economists.

 

The movement of the rupee and US Treasury yields could also lend cues. The one-year swap rate is seen at 5.90-6.10% and the five-year at 6.40-6.64%.

 

	At 1700 IST	FRIDAY
1-year OIS	6.05%	6.04%
2-year OIS	6.24%	6.23%
5-year OIS	6.54%	6.54%
2-year MIFOR	6.67%	6.61%
5-year MIFOR	6.94%	6.89%

 

End

 

US$1 = INR 95.7075

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

 

Edited by Avishek Dutta

 

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