OIS curve signals 20-bp cut in repo rate by February

The one-year overnight indexed swap (OIS) rate, the most closely watched gauge of near-term interest-rate expectations, is now pricing in a 20 basis-point cut in the repo rate by February, market participants said.

- ANJALI KUMARI

Overnight swap rates have declined across the curve this week.

The one-year OIS rate fell six basis points this week, trading at over a month’s low. On Wednesday it settled at 5.42 per cent, unchanged against Tuesday’s rate.

The bond market gained renewed clarity on the prospects of a policy basis point repo-rate cut after Reserve Bank of India (RBI) Governor Sanjay Malhotra said earlier this week there remained room for monetary easing.

Even then market sentiment remains divided, with participants split between those expecting a cut in December and those who say policy uncertainty continues to warrant caution.