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Derivatives

Indian I-Rate Volumes Double

Interest rate swap volumes in India have roughly doubled over the last month in anticipation of further rate cuts. "Volume has picked up quite a bit," said Srinivasan Varadarajan, treasurer at JPMorgan in Mumbai. He continued that trading volume has grown to USD75 million per day in recent weeks from about USD30-40 million per day a month ago. He explained that much of the activity stems from interbank players putting on positions anticipating a rate cut when the Reserve Bank of India meets later this month. "People are looking to put on positions and ride it down," added Varadarajan. Interest rate swap levels have come down as well over the past few weeks, for instance five-year swap levels were around 6.55% a month ago and have fallen about 25 basis points since.

"Trading has increased as the interest rate scenario has softened," said Ashish Barthasarthy, head of trading at HDFC Bank in Mumbai. He continued that in a typical position traders pay floating and receiving fixed from one to five years.

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