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Informist, Friday, Aug. 7, 2026

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates ended off the day's high tracking an intraday fall in crude oil prices, dealers said. Swaps rose slightly earlier in the session as crude oil prices had risen overnight, dealers said. Some mutual funds also paid fixed rate contracts in swaps, dealers said. The incentive to receive fixed rates in swaps is seen limited, as swaps are unlikely to fall further unless crude oil prices plunge, they said. 

 

The one-year swap rate closed at 5.77%, the same as Thursday. The five-year swap rate settled at 6.26%, a tad lower from 6.27% the previous session. Both swaps are down 15-16 basis points each on week. The spread between the two was little changed on week at about 50 bps. The total notional trading volume reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 305.80 billion, slightly lower than INR 355.05 billion Thursday.

 

Traders see little incentive to receive fixed rate contracts at current levels, given the fall in swap rates this week, they said. Bond issuers also stayed away from receiving fixed rates for hedging, with the expectations that rates will rise in the near-term, dealers said. Moreover, risk appetite ahead of the weekend was poor, incase the conflict in West Asia escalated again, dealers said. Volumes were thin in lacklustre trade, with offshore traders largely absent, they said. Some traders who did receive fixed rate contracts maximised their return by purchasing certificates of deposit or commercial paper, dealers said. 

 

"We don't see rates going any lower from here...the last time this happened we thought we'd wait it out before paying but rates rose so we're paying at these levels itself," a dealer at a mutual fund said. 

 

OUTLOOK

Swaps are not traded Saturdays. On Monday, swap rates are seen tracking the movement of crude oil prices and US Treasury yields over the weekend. US yields fell post-market hours after non-farm payrolls in the US unexpectedly fell by 23,000 in July, against a Wall Street Journal poll estimate of an 83,000 rise. 

 

Swaps are seen little changed unless crude oil prices shift significantly overnight. Several traders are shifting to paid bets with swaps unlikely to ease with elevated US Treasury yields, even as commentary by the Reserve Bank of India indicates no urgency to opt for a rate hike domestically, dealers said. Banks which were receiving fixed rates due to FCNR(B) deposits are reducing the pace of receiving, they said. Some foreign banks are still seen receiving fixed rates due to foreign inflows through these deposits, dealers said. Some fund-raisers could receive rates to hedge their bond issuances if swap rates rise, dealers said. The movement of the rupee and overnight borrowing rates will also lend cues. The one-year swap rate is seen in the range of 5.65-6.10% and the five-year at 6.07-6.40%.

 

	At 1700 IST	THURSDAY
1-year OIS	5.77%	5.78%
2-year OIS	5.94%	5.95%
5-year OIS	6.26%	6.26%
2-year MIFOR	6.86%	6.86%
5-year MIFOR	7.04%	7.04%

 

End

 

US$1 = INR 95.2075

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

 

Edited by Deepshikha Bhardwaj

 

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