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Informist, Friday, Jul. 3, 2026

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates inched lower nearing the end of trade Friday, as domestic traders from mutual funds and private sector banks received fixed rates on bets of bond yields and swap rates falling in the near-term, dealers said. Swaps were largely steady for most of the session in thin trade amid a lack of major triggers, they said. Volumes were thin amid a lack of major offshore flows, they added. 

 

The one-year swap rate closed at 5.78%, from 5.79% Thursday. The five-year swap rate ended at 6.18%, down from 6.20% Thursday. The total notional trading volume reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 317.70 billion, slightly up from INR 233.15 billion Thursday. The US Treasury market is shut Friday. The 10-year US Treasury yield eased to 4.49?ter the release of US non-farm payrolls data for June Thursday, from 4.50% at 1700 IST Thursday.   

 

Swap rates opened largely steady, even as non-farm payrolls data in the US pared bets of an imminent rate hike in the US. An overnight rise in near-month Brent crude oil futures to about $72 per barrel from $70 per barrel the previous session led to traders paying fixed rates in a small quantum early in the session, dealers said.

 

"We saw a strong flow but low volume that took five-year (OIS) to 6.21-6.2150%, but then some receiving was equally strong because we didn't sustain that level," a dealer at a state-owned bank said.  

 

Some traders paid fixed-rate contracts to hedge their bond purchases, dealers said. The five-year OIS rate is seen trading in a range of 6.14% to 6.25% until Bloomberg Index Services publishes its review of the possible inclusion of Indian government bonds in its flagship Global Aggregate Index, leaving little scope for trade in OIS unless large offshore flows move rates, dealers said. 

 

However, nearing the end of trade, swaps inched lower on optimism of a fall in rates in the near-term, with the Bloomberg review expected in two weeks, and traders also covered short positions in gilts, dealers said. 

 

"It was some private bank activity, some bullish view led to position building," a trader at a primary dealership said. 

 

OUTLOOK

Swaps are not traded Saturdays. Monday, swap rates are seen tracking the movement of US Treasury yields in early Asian trade. Swap rates will also track the movement of crude oil prices. Traders await Bloomberg's decision on the inclusion of gilts in its flagship index, with most traders betting on an inclusion. Traders also expect overnight rates to ease due to a liquidity boost from expected inflows into foreign currency non-resident bank deposits.

 

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. However, no rate hike is expected until October after assessing recent commentary from RBI officials, dealers said. 

 

The movement of the rupee could also lend cues. The one-year swap rate is seen in the range of 5.60-5.90% and the five-year at 6.10-6.30%. 

 

	At 1700 IST	THURSDAY
1-year OIS	5.78%	5.79%
2-year OIS	5.91%	5.93%
5-year OIS	6.18%	6.20%
2-year MIFOR	6.74%	6.75%
5-year MIFOR	6.97%	6.98%

 

End

 

US$1 = INR 95.2100

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

 

Edited by Deepshikha Bhardwaj

 

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