Informist, Thursday, Mar 23, 2023

By Kasthuri Akhil

MUMBAI – Overnight indexed swap rates ended little changed today as the domestic rate view stabilised at a 25-basis-point repo rate hike in April following the US Federal Open Market Committee's rate decision on Wednesday, dealers said.

The five-year swap rate ended at 6.28% against Tuesday's close of 6.29%, while the one-year swap rate settled at 6.74%, against 6.75% on Tuesday. Money markets were closed on Wednesday on account of Gudi Padwa.

The US Federal Open Market Committee raised the federal funds target range by 25 bps for the second straight meeting to 4.75-5.00% on Wednesday. Following the Fed's decision, domestic traders remained firm on a 25-bps rate-hike expectation from the domestic rate-setting panel in April, dealers said.

"There is no clarity in the market about where will the rates go in the US. Traders were just unwinding today to book profits," a dealer at a primary dealership said. "They will take new positions if any new data comes in that gives a clearer rate view." 

The movement in US Treasury yields remained volatile during the day. The yield on the benchmark 10-year US Treasury note rose to 3.50% towards the end of Indian market hours from 3.45% in early trade. Tracking the intraday rise in US yields, traders unwound their received fixed-rate bets at a profit which led the swap rates to end at the highest levels for the day, dealers said.

In early trade, the yield fell 10 basis points to 3.45% from the close of Indian market on Tuesday. US Treasury yields fell due to expectations that the key policy rate may peak out soon, after the rate hike on Wednesday.

 "If you see, even though US yield fell so much, fall in OIS has been limited. In the five-year swap rate, whenever it neared 6.23-6.24%, there was paying," a dealer at a private bank said. "People are still not very clear about the rate view to place bets on."

Since the Fed's dot plot remained unchanged, the domestic market remained a bit concerned regarding the trajectory of rate hikes going forward. The latest dot plot suggests interest rates will continue to tick higher this year, with the Fed funds rate seen peaking at 5.1%, the same as the Fed's December projection.

The US Federal Open Market Committee's dot plot is a chart that illustrates each committee member's projection of where the Federal funds rate will be at the end of a particular period. 

Traders hoped to gain more insight into the rate hike view as and when the US Treasury yields stabilise a day later, after Wednesday's Fed policy review, dealers said. 

OUTLOOK

On Friday, swap rates are seen steady due to lack of a firm rate hike view in the US. Moreover, traders lack significant cues in the domestic market, dealers said.

Traders may also watch out for any sharp movement in US Treasury yields and crude oil prices at open.

The swap rate in the one-year segment is seen at 6.55-6.85%, and the five-year at 6.15-6.50%.

End

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

Edited by Avishek Dutta

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 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2023. All rights reserved.

Informist, Thursday, Mar 23, 2023

By Kasthuri Akhil

MUMBAI – Overnight indexed swap rates ended little changed today as the domestic rate view stabilised at a 25-basis-point repo rate hike in April following the US Federal Open Market Committee's rate decision on Wednesday, dealers said.

The five-year swap rate ended at 6.28% against Tuesday's close of 6.29%, while the one-year swap rate settled at 6.74%, against 6.75% on Tuesday. Money markets were closed on Wednesday on account of Gudi Padwa.

The US Federal Open Market Committee raised the federal funds target range by 25 bps for the second straight meeting to 4.75-5.00% on Wednesday. Following the Fed's decision, domestic traders remained firm on a 25-bps rate-hike expectation from the domestic rate-setting panel in April, dealers said.

"There is no clarity in the market about where will the rates go in the US. Traders were just unwinding today to book profits," a dealer at a primary dealership said. "They will take new positions if any new data comes in that gives a clearer rate view." 

The movement in US Treasury yields remained volatile during the day. The yield on the benchmark 10-year US Treasury note rose to 3.50% towards the end of Indian market hours from 3.45% in early trade. Tracking the intraday rise in US yields, traders unwound their received fixed-rate bets at a profit which led the swap rates to end at the highest levels for the day, dealers said.

In early trade, the yield fell 10 basis points to 3.45% from the close of Indian market on Tuesday. US Treasury yields fell due to expectations that the key policy rate may peak out soon, after the rate hike on Wednesday.

 "If you see, even though US yield fell so much, fall in OIS has been limited. In the five-year swap rate, whenever it neared 6.23-6.24%, there was paying," a dealer at a private bank said. "People are still not very clear about the rate view to place bets on."

Since the Fed's dot plot remained unchanged, the domestic market remained a bit concerned regarding the trajectory of rate hikes going forward. The latest dot plot suggests interest rates will continue to tick higher this year, with the Fed funds rate seen peaking at 5.1%, the same as the Fed's December projection.

The US Federal Open Market Committee's dot plot is a chart that illustrates each committee member's projection of where the Federal funds rate will be at the end of a particular period. 

Traders hoped to gain more insight into the rate hike view as and when the US Treasury yields stabilise a day later, after Wednesday's Fed policy review, dealers said. 

OUTLOOK

On Friday, swap rates are seen steady due to lack of a firm rate hike view in the US. Moreover, traders lack significant cues in the domestic market, dealers said.

Traders may also watch out for any sharp movement in US Treasury yields and crude oil prices at open.

The swap rate in the one-year segment is seen at 6.55-6.85%, and the five-year at 6.15-6.50%.

End

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

Edited by Avishek Dutta

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 

Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2023. All rights reserved.