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Informist, Wednesday, Sept. 30, 2026

 

By Aaryan Khanna

 

NEW DELHI – Overnight indexed swap rates ended on a mixed note. Rates on swap contracts maturing up to two years ended higher, while the five-year OIS rate ended flat. Traders were cautious about carrying positions overnight after a fall in rates on Tuesday and in the first half of Wednesday, leading to a spate of position cutting in the latter half of trade, deaelrs said.

 

The one-year swap rate ended at 6.21%, up from 6.19% Tuesday. The five-year swap rate closed at 6.65%, flat against Tuesday. The one-year swap rate had hit a low of 6.17% intraday, while the five-year swap rate had fallen to 6.62%. Total notional trading volume on Clearing Corp. of India's derivatives trading platform was INR 386.45 billion Monday, down from INR 513.87 billion Friday.

 

"There is a lot of risk aversion in the market, that's all. There really wasn't a solid reason for the market to react badly today," a dealer at a private sector bank said. "Even we are mystified by such a rise, though it could be because crude priced moved up intraday."

 

Oil prices fell overnight amid easing supply concerns after Saudi Arabia reportedly restored about half the capacity of its East-West pipeline following drone attacks, according to a Bloomberg report. Brent crude oil futures for November delivery were at $103.22 per barrel at 1700 IST, down from $104.21 per barrel at the end of Indian market hours Tuesday.

 

The yield on the 10-year benchmark US Treasury note also remained below the key level of 5.25% through the session, capping OIS rates. On Monday and Tuesday, the 10-year US yield had risen above the psychologically crucial level, the highest in over 19 years, which had led to offshore traders consistently paying fixed rates, dealers said. 

 

"US yields did not make fresh highs, so in that sense there was no incremental negative," a dealer at a primary dealership said. "There are also domestic flows coming in bit by bit for product hedging at these levels, which are on the higher side and are pricing in substantial rate hikes." The dealer was referring to corporate bond issuers receiving fixed rates.

 

OIS rates continued to price in around 125 bps of repo rate increases from the current 5.25% over the next year, dealers said. Some traders may have also paid fixed rates Wednesday on caution before the upcoming rate decision on Oct. 7, with a unanimous view among traders that the RBI's Monetary Policy Committee will begin its rate hiking cycle next week, dealers said. 

 

OUTLOOK

On Thursday, swap rates will take cues from movements in crude oil prices and US Treasury yields at the open and developments in the war in West Asia, dealers said. The next significant domestic rate trigger is the MPC's rate decision next week, they said. 

 

As the US Federal Reserve hiked interest rates in September, the RBI's rate-setting panel is seen following suit with a 25-bps repo rate hike next week, dealers said. Inflation readings are rising, while growth indicators show resilience, strengthening the case for repo rate increases, they said. A repo rate increase of 25 bps is already factored into OIS rates.

 

For direction, traders will focus on comments by RBI Governor Sanjay Malhotra after the policy decision. Traders expect the central bank to introduce more measures to drain systemic liquidity, beyond the government bond sales it conducted this month and variable rate reverse repo operations, they said. Some expect more open-market operations sales of up to INR 1 trillion in October, while others expect a hike in banks' cash reserve ratio. The one-year swap rate is seen in the range of 5.95–6.32% and the five-year at 6.40–6.85%.

 

	At 1700 IST	TUESDAY
1-year OIS	6.21%	6.19%
2-year OIS	6.41%	6.39%
5-year OIS	6.65%	6.65%
2-year MIFOR	7.71%	7.79%
5-year MIFOR	7.70%	7.79%

 

End

 

US$1 = INR 95.83

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

 

Edited by Avishek Dutta

 

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