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Informist, Friday, Sept. 18, 2026

 

By Janwee Prajapati

 

MUMBAI – Overnight indexed swap rates ended slightly higher, tracking an intraday rise in US Treasury yields and a marginal increase in Brent crude oil prices, dealers said. Swap rates traded in a thin band Friday as traders refrained from placing aggressive bets ahead of the weekend, which kept trade volumes subdued, dealers said.

     

"There is nothing much happening in the market today... swap rates were simply tracking crude (oil prices) in the morning," a dealer at a private sector bank said. "Some people must have squared their positions."

 

Brent crude oil futures for mid-month delivery were at $103.35 per barrel, similar to $103.54 per barrel at the end of Indian trading hours, but up from the day's low of $101.92 per barrel, which pushed swap rates up, dealers said. However, swap rates were lower in early trade after crude oil prices eased, dealers said. The fall in Brent crude oil prices from the psychologically crucial level of $105 per barrel lifted traders' sentiments. Traders said the "risk-reward" seemed lucrative at this level, if crude oil prices remain at current levels, till the Reserve Bank of India's Monetary Policy Committee meeting in October.     

 

The yield on the 10-year US Treasury note was at 4.98% at 1700 IST, virtually unchanged from the end of Indian trading hours Thursday, but up from the day's low of 4.92%, which also pulled up swap rates, dealers said. However, traders said swap rates were "well-behaved" Friday after the market absorbed a 25 basis point hike in US policy rate at the Federal Open Market Committee meeting Wednesday. However, the FOMC rate hike fuelled expectations of a rate hike by the RBI's MPC, with most traders now expecting a hike at the October meeting, dealers said.    

 

"US Treasury is down slightly... There is no further data point left there. Rates will not move much unless something significant happens in (RBI's Monetary Policy Committee meeting) MPC," a dealer at another private sector bank said. "Five-year OIS is likely to channel upwards, but it could once see the 6.50-6.52% level."

 

The one-year swap rate ended at 6.07%, up from 6.04% Thursday. The five-year swap rate ended at 6.59%, slightly up from 6.58% Thursday. The one-year swap rate oscillated between 6.05% and 6.07%, whereas the five-year swap rate moved between 6.58% and 6.59%, a movement of just 1 basis point. Traders said the one-year OIS rate is pricing in only 1–2 rate hikes at the current level. However, they said there is scope for another 20 basis point rise in one-year swap rates if it rises above 6.14-6.15%. The five-year OIS rate, on the other hand, is expected to fall to 6.50-6.52%, the next technical level and a fair level to pay fixed rates, dealers said. However, it will likely retrace and rise to 6.80% levels, dealers said. Some traders expect at least two rate hikes in this calendar year starting in October, while others expect at least three repo rate hikes in the financial year. Total notional trading volume on Clearing Corp. of India Ltd.'s derivatives trading platform was INR 245.50 billion Friday, down 54% from INR 533.50 billion Thursday.

 

OUTLOOK

Swaps are not traded on Saturdays. On Monday, swap rates are seen tracking overnight movements in crude oil prices, with some traders expecting these prices to move downward in the near term. Swaps will also track movement in US Treasury yields, with the US yield curve flattening after the FOMC hiked the fed funds target rate for the first time since 2023. Thursday, the spread between the one-year and five-year swap rates was little changed from Wednesday.

 

As the US Fed began its rate hike cycle, the RBI's rate-setting panel is seen following suit with a 25-bps repo rate hike in October, dealers said. Traders also expect the RBI to introduce more measures to drain systemic liquidity, beyond the government bond sales it is conducting this month and variable rate reverse repo operations, they said. 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	6.07%	6.04%
2-year OIS	6.28%	6.26%
5-year OIS	6.59%	6.58%
2-year MIFOR	7.64%	7.69%
5-year MIFOR	7.73%	7.78%

 

 

End

 

US$1 = INR 95.87

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

 

Edited by Saji George Titus

 

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