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Informist, Tuesday, Aug. 25, 2026

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates ended sharply down Tuesday, tracking a fall in Brent crude oil prices on reports that talks between the US and Iran have progressed significantly. Brent crude oil futures for delivery in October fell below $90 per barrel from $92.42 per barrel at 0900 IST and $93.21 per barrel at the end of swap market hours Monday. Some banks received fixed-rate contracts for their asset and liability management, dealers said. Traders also speculated that state-owned companies issuing bonds hedged their bond issuances by receiving fixed rates in swaps. Volumes picked up, suggesting a large entity was active in swaps, they said. 

 

The one-year swap rate closed at 5.86% Tuesday, near the day's low of 5.85%, as against 5.92% Monday. The five-year swap rate ended at 6.35%, against 6.45% the previous day. The total notional trading volume on Clearing Corp. of India Ltd.'s derivatives trading platform rose sharply to INR 724.95 billion from INR 448.30 billion Monday. Turnover in the five-year OIS rate was the highest since Jul. 20. The one-year OIS fell over 6 basis points Tuesday, while the five-year fell over 10 bps, both falling the most in a day since Aug. 5, the day the Reserve Bank of India announced its August monetary Policy. The 10-year OIS rate was traded for the first time since Jul. 8, adding to speculation that corporates raising long-term bonds were hedging in swaps, dealers said. However, some dealers said small issuance sizes were unlikely to translate into large swap volumes. 

 

"The oil price fall and the news came only in the afternoon, right, but someone has been receiving, and volumes have been up since morning," a dealer at a state-owned bank said. Some state-owned banks also received fixed-rate contracts to hedge interest payments on foreign currency non-resident (bank) deposits, dealers said. Albeit, sizeable receiving came largely from private-sector banks, dealers said. 

 

Swaps opened largely steady since global triggers such as oil prices and US Treasury yields were little changed overnight, but fell during the session, and the fall increased once Brent oil prices fell below $90 per barrel as traders unwound paid bets, dealers said. The US and Iranian delegations exchanged views on the path to achieving a negotiated settlement to the war in West Asia, Pakistani officials said in a statement, prompting swap traders to bet on a peace deal. "Crude fell below $90 (per barrel), which led to some short-covering in G-Sec and then we saw receiving in OIS also, because of some news of a deal from Al-Arabiya," a dealer at a private-sector bank said. 

 

OUTLOOK

Money markets are shut Wednesday for Id-E-Milad. Thursday, swaps will track any signs of a peace deal between the US and Iran, and movement in crude oil prices, dealers said. US Treasury yields will also provide direction ahead of the annual Jackson Hole Economic Policy Symposium, where US Federal Reserve Chair Kevin Warsh is scheduled to speak. Dealers also said they will watch how banks deploy the last of inflows received through foreign currency non-resident bank deposits and the trajectory of systemic liquidity once the window to raise such deposits under the scheme shuts Monday.

 

If Brent crude oil prices sustain Tuesday's fall, traders will begin to price out imminent rate hikes in both the US and India, even though 'hawkish' commentary from US and Indian central bank officials recently has kept up rate hike bets. The movement of the rupee and overnight borrowing rates will also lend cues. Thursday, the one-year swap rate is seen in the range of 5.70-6.00% and the five-year at 6.20-6.52%.

 

	At 1700 IST	MONDAY
1-year OIS	5.86%	5.92%
2-year OIS	6.04%	6.14%
5-year OIS	6.35%	6.45%
2-year MIFOR	6.89%	6.95%
5-year MIFOR	7.03%	7.10%

 

End

 

US$1 = INR 95.4125

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

 

Edited by Saji George Titus

 

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