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Informist, Friday, Sept. 11, 2026

 

--India's 1-year OIS ends at 6.03%, highest since Jul 23 

--India's 5-year OIS ends at 6.57%, highest close since Jun 4 

 

By Cassandra Carvalho

 

MUMBAI – Overnight indexed swap rates ended higher Friday as near-month Brent crude oil futures hit a high of $108 per barrel during Indian market hours, the highest in about four months, and as the yield on the 10-year US Treasury note inched closer to the psychologically crucial 5.00% level. The Reserve Bank of India's announcement to sell government bonds through open market operations this month is seen flattening the swap rate curve, after a steady widening seen largely so far this month. 

 

The one-year swap rate ended at 6.03% – the highest since Jul. 23 — and up from 6.00% Thursday. The five-year swap rate ended at 6.57%, against 6.52% Thursday. Total notional trading volume on Clearing Corp. of India Ltd.'s derivatives trading platform jumped to INR 702.20 billion Friday from INR 496.40 billion Thursday. The one-year swap rose 4 basis points on week, while the five-year OIS rose 10 bps. The spread between the two widened from 48 bps on Sept. 4 to 54 bps Friday.

 

"Market hasn't steepened yet, 1-year OIS hasn't risen as much because people are still divided on whether there'll be a rate hike in October domestically," a dealer at a private-sector bank said. "It all depends on Sept. 16 (Wednesday). That will decide what happens in October." Traders await the US Federal Open Market Committee's rate decision on Wednesday for cues on the RBI's Monetary Policy Committee's meeting decision in October. 

 

Brent crude oil futures for delivery in November rose to $108.38 per barrel at 0900 IST, from $102.15 per barrel at 1700 IST Thursday, as the US-Iran war continued to escalate. However, oil prices eased by the end of swap market hours to $104.20 per barrel, following which swaps also eased from the day's highs. "We had paid at around 48 (6.48% on 5-year OIS) so 6.60% was good to exit those trades (and receive OIS)," a dealer at another private-sector bank said. The five-year OIS hit a day's high of 6.62%. The yield on the 10-year US Treasury note was 4.95% at 1700 IST, easing from 4.98% at 0900 IST, but still close to 5%.

 

Swaps largely tracked global triggers and changed little during an interview with RBI Governor Sanjay Malhotra, telecast on CNBC-TV18 during market hours, even as government bond prices fell further. Malhotra said the central bank could opt for open market operation sell auctions and dollar-rupee sell-buy swaps to drain systemic liquidity, remarks traders interpreted as foreshadowing a likely announcement of such measures. Post-market hours, the RBI announced OMO sales of INR 1 trillion. "There definitely seemed to be a reason why they put the interview today, with no other event or such lined up, so the market knew that something (a measure) would come," a dealer at another private-sector bank said. 

 

OUTLOOK

Swaps are not traded on Saturdays. Indian financial markets are shut Monday for Ganesh Chaturthi. Tuesday, short-term swap rates are seen rising more than longer-term rates, as the RBI said it would drain INR 1 trillion of systemic liquidity through OMO sales of gilts this month. Swaps will also track movements in US yields and oil prices. Traders will assess August inflation prints in both India and the US for cues on interest-rate moves in both countries. CPI inflation last month rose 3.4% on year in the US, the same as consensus estimates. The print comes just before the US Federal Open Market Committee's meeting next week. Bets of a rate hike this month by the Fed rose after the print, as per the CME FedWatch tool. Dealers expect that if the Fed opts for a rate hike in September, the RBI's rate-setting panel will follow suit in October.

Alongside liquidity-draining measures from the RBI such as OMO sales and variable rate reverse repo operations, traders also expect the RBI to conduct dollar-rupee sell-buy swaps both in the primary and secondary markets. 

 

Dealers also await the release of India's CPI inflation data for August on Monday. Retail inflation in India is likely to rise to a 20-month high of 4.8% in August from 4.45% in July, according to the median estimate in an Informist poll of economists. Inflation rising above the RBI's 4% target may put pressure on the central bank to raise the repo rate.

 

As received bets linked to banks' inflows from foreign currency non-resident (banks) deposits have stopped this week, nearing the end of the deadline Friday to swap dollars under this scheme, swap rates may no longer be capped, dealers said. After the OMO sales announcement, bets that the swap rate curve will flatten will take time to play out have been wiped out as the RBI begins draining liquidity. The one-year swap rate is seen in the range of 5.95-6.15% and the five-year at 6.40-6.70%.

 

	At 1700 IST	THURSDAY
1-year OIS	6.03%	6.00%
2-year OIS	6.24%	6.21%
5-year OIS	6.57%	6.52%
2-year MIFOR	7.50%	7.42%
5-year MIFOR	7.60%	7.52%

 

End

 

US$1 = INR 95.55

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

 

Edited by Saji George Titus

 

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