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Informist, Monday, Jun. 29, 2026

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates ended steady Monday, retreating from the slight rise seen earlier in the day. Traders were cautious of the trajectory of Brent crude oil price after fresh skirmishes between the US and Iran over the weekend, they said. Some traders were also hedging their bond purchases by paying fixed rates and squaring off positions as they close their books for the June quarter, they said. Swaps inched higher after hitting the lower end of the trading range last week and failing to go further down.

 

The one-year swap rate closed at 5.77%, the same as Thursday. The five-year swap rate ended at 6.19%, up slightly from 6.18% Thursday. Indian financial markets were shut Friday for Muharram. Monday, the five-year swap moved in the range of 6.16-6.22%.

 

"We hit a low of 6.14% on five-year and even in one-year we had hit 5.70% (last week), but we have rebounded from those levels," a dealer at a state-owned bank said. "We are looking at how long crude remains at these (pre-war) levels before another big move (receiving) comes in."

 

Mutual funds paid fixed rate contracts to hedge purchases made in government bonds, dealers said. The total notional trading volume reported on Clearing Corp. of India Ltd.'s derivatives trading platform fell to INR 276.25 billion from INR 327.35 billion Thursday. The yield on the 10-year benchmark US Treasury note was 4.38% at 1700 IST, down slightly from 4.39% at 0900 IST, and from 4.41% at 1700 IST Thursday. The 4.37-4.38% level is the 200-day moving average of the yield. If this level is broken, it could spur a fall in swap rates after the one- and five-year swaps hit a three-month low Thursday.

 

The Brent crude oil futures contract for delivery in August was at $72.55 per barrel at 1700 IST, similar to $72.96 per barrel at the same time Thursday, even after the US and Iran exchanged fire over the weekend, though US officials reportedly said the two countries will hold talks in Doha, Qatar, Tuesday. If Brent crude oil sustains at the current pre-war price level in the longer run, swaps could fall further and the five-year OIS could fall to its pre-war level of 5.99%, dealers said. A fall in the one-year OIS is less likely, as expectations of a weak monsoon keep bets of higher inflation and a rate hike by the Reserve Bank of India's Monetary Policy Committee in the current financial year intact, they said.

 

OUTLOOK

Swap rates are seen tracking US Treasury yields Tuesday. Traders are likely to play on spreads between swaps and gilt yields as the latter have greater scope to fall in the near term, dealers said. Deficient rainfall and higher food prices are expected to push up retail inflation in the coming months while the RBI is likely to drain systemic liquidity ahead of a likely rate hike cycle, dealers said. Though most traders no longer expect a repo rate hike in August or October, they are wary of a US Federal Open Market Committee rate hike sharply changing expectations for domestic rates, dealers said.

 

The movement of the rupee could also lend cues Tuesday. The one-year swap rate is seen at 5.60-5.90% and the five-year at 6.02-6.25%.

 

	At 1700 IST	THURSDAY
1-year OIS	5.77%	5.76%
2-year OIS	5.91%	5.91%
5-year OIS	6.19%	6.18%
2-year MIFOR	6.73%	6.73%
5-year MIFOR	6.94%	6.94%

 

End

 

US$1 = INR 94.5400

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

 

With inputs from Aaryan Khanna

Edited by Rajeev Pai

 

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