Informist, Wednesday, Nov 23, 2022
By Anjali
NEW DELHI – Overnight indexed swap rates ended on a mixed note even as traders avoided large bets ahead of the minutes of the Federal Open Market Committee's November meeting, due past midnight, dealers said.
The one-year swap rate settled at 6.72% as against 6.70% on Tuesday. The five-year swap rate ended at 6.40%, against the previous day's close of 6.43%.
The minutes of the Fed meeting are expected to provide cues on the US Federal Reserve's path of monetary policy tightening, with inflation well above the US central bank's 2% long-term target. In October, CPI inflation in the US was 7.7% on year.
Aggressive policy tightening by the Fed may in turn prompt the Reserve Bank of India to increase the repo rate sharply in a bid to arrest a sharp depreciation in the rupee, dealers said.
The Fed was widely expected to raise rates by 50 basis points at its December policy review, but hawkish comments may raise expectation of a 75-bps rate hike, dealers said.
Consequently, the RBI's Monetary Policy Committee may increase the policy repo rate by 50 bps instead of the 35 bps that the market has already priced in at its Dec 7 rate decision, dealers said.
"The swap rates are moving in a thin band because the traders lack significant triggers," a dealer at a private bank said. "The US Federal Reserve will most likely take a hawkish stand."
Traders expect interest rates to continue rising in the near term, which led to some paying in swaps maturing up to one year, dealers said.
However, overnight rates may come down after the current wave of inflation is brought under control, as such high rates may be out of favour for medium-term growth in India and abroad. The view led to some unwinding of received positions in swaps maturing over two years, dealers said.
Some offshore traders also received fixed rates after an overnight fall in US Treasury yields. The yield on the benchmark 10-year US Treasury note fell 7 bps to 3.76% on Tuesday.
"Receiving in the one-year doesn't make sense, it is barely balanced on the risk-reward front with the current rate view on the domestic side," a dealer at a foreign bank said. "There is some scope in the longer tenures, and I expect flattening to continue."
OUTLOOK
On Thursday, swap rates are seen taking cues from the minutes of the Federal Open Market Committee's November meeting, due past midnight.
US markets are closed on Thursday for Thanksgiving, that may push offshore traders into the domestic OIS market, dealers said.
Traders may also watch out for any sharp movement in crude oil prices and US Treasury yields at open.
Swap rate in the one-year segment is seen at 6.60-6.80%, and in the five-year segment at 6.30-6.52%.
| At 1530 IST | Tuesday |
1-year OIS | 6.72% | 6.70% |
2-year OIS | 6.46% | 6.45% |
5-year OIS | 6.40% | 6.43% |
2-year MIFOR | 6.56-6.68% | 6.59-6.71% |
5-year MIFOR | 6.78-6.90% | 6.80-6.92% |
End
Edited by Tanima Banerjee
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000 /+91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2022. All rights reserved.
Informist, Wednesday, Nov 23, 2022
By Anjali
NEW DELHI – Overnight indexed swap rates ended on a mixed note even as traders avoided large bets ahead of the minutes of the Federal Open Market Committee's November meeting, due past midnight, dealers said.
The one-year swap rate settled at 6.72% as against 6.70% on Tuesday. The five-year swap rate ended at 6.40%, against the previous day's close of 6.43%.
The minutes of the Fed meeting are expected to provide cues on the US Federal Reserve's path of monetary policy tightening, with inflation well above the US central bank's 2% long-term target. In October, CPI inflation in the US was 7.7% on year.
Aggressive policy tightening by the Fed may in turn prompt the Reserve Bank of India to increase the repo rate sharply in a bid to arrest a sharp depreciation in the rupee, dealers said.
The Fed was widely expected to raise rates by 50 basis points at its December policy review, but hawkish comments may raise expectation of a 75-bps rate hike, dealers said.
Consequently, the RBI's Monetary Policy Committee may increase the policy repo rate by 50 bps instead of the 35 bps that the market has already priced in at its Dec 7 rate decision, dealers said.
"The swap rates are moving in a thin band because the traders lack significant triggers," a dealer at a private bank said. "The US Federal Reserve will most likely take a hawkish stand."
Traders expect interest rates to continue rising in the near term, which led to some paying in swaps maturing up to one year, dealers said.
However, overnight rates may come down after the current wave of inflation is brought under control, as such high rates may be out of favour for medium-term growth in India and abroad. The view led to some unwinding of received positions in swaps maturing over two years, dealers said.
Some offshore traders also received fixed rates after an overnight fall in US Treasury yields. The yield on the benchmark 10-year US Treasury note fell 7 bps to 3.76% on Tuesday.
"Receiving in the one-year doesn't make sense, it is barely balanced on the risk-reward front with the current rate view on the domestic side," a dealer at a foreign bank said. "There is some scope in the longer tenures, and I expect flattening to continue."
OUTLOOK
On Thursday, swap rates are seen taking cues from the minutes of the Federal Open Market Committee's November meeting, due past midnight.
US markets are closed on Thursday for Thanksgiving, that may push offshore traders into the domestic OIS market, dealers said.
Traders may also watch out for any sharp movement in crude oil prices and US Treasury yields at open.
Swap rate in the one-year segment is seen at 6.60-6.80%, and in the five-year segment at 6.30-6.52%.
| At 1530 IST | Tuesday |
1-year OIS | 6.72% | 6.70% |
2-year OIS | 6.46% | 6.45% |
5-year OIS | 6.40% | 6.43% |
2-year MIFOR | 6.56-6.68% | 6.59-6.71% |
5-year MIFOR | 6.78-6.90% | 6.80-6.92% |
End
Edited by Tanima Banerjee
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000 /+91 (11) 4220-1000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2022. All rights reserved.
