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Informist, Friday, Aug. 14, 2026

By Cassandra Carvalho

MUMBAI – Overnight indexed swap rates ended steady in lacklustre trade Friday, though swaps tracked an intraday movement in Brent crude oil prices, dealers said. Some foreign banks received fixed-rate contracts to deploy their foreign currency non-resident (banks) deposits, dealers said. Domestic traders ramped up paid bets, limiting a fall in swaps even as Brent crude oil prices fell intraday, dealers said. Some offshore traders have been paying fixed-rate contracts.  

The one-year swap rate closed at 5.73%, down from 5.75% Thursday. The five-year swap rate settled at 6.25%, the same as the previous session. The total notional trading volume reported on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 263.65 billion, lower than INR 337.60 billion Thursday. The one-year OIS rate has fallen nearly four basis points on week, while the five-year OIS rate has fallen just one basis point on week.  

"People are not interested in receiving at these levels," a trader at a primary dealership said. "The domestic side is paying here, while the foreign banks have been receiving." The fall in swaps is likely to have bottomed out at current levels, most dealers expect. The five-year OIS rate fell to a day's low of 6.22%, the lowest since Aug. 6. This level is also a daily moving average, becoming a crucial technical level which is unlikely to break if crude oil prices fall sharply, dealers said. Fundraisers are also not comfortable hedging their fixed rate issuances at current levels in swaps, they said. 

The yield on the 10-year US Treasury note was 4.66% at 1700 IST, a tad lower from 4.68% at the same time Thursday. Brent crude oil futures for delivery in October also slipped intraday, to $87.20 per barrel at 1700 IST from nearly $89 earlier in the session. 

OUTLOOK

Swaps are shut Saturdays. On Monday, swap rates are seen higher as traders pare expectations of foreign inflows rising after the RBI post-market hours said it will cease the concessional swap facility for foreign currency non-resident (banks) deposits for such deposits raised post Aug. 31. Traders had expected foreign inflows topping $100 billion, with FCNR(B) deposits leading these inflows, and thus had expected ample durable liquidity in the banking system. Traders had expected core systemic liquidity surplus to hit INR 9 trillion on the back of robust inflows from FCNR(B) deposits. These bets will be pared, and several banks had plans in place to raise such deposits through leveraging products in September. On expectations of lower systemic liquidity, borrowing rates are likely to rise, dealers said. 

Traders will track the movement of crude oil prices and US Treasury yields, dealers said. Elevated US Treasury yields are also a concern for traders, limiting a fall in swaps, they 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 6.12-6.40%.

End

US$1 = INR 95.43

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

Edited by Deepshikha Bhardwaj

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