India 5-yr swap at 2-1/2-mth low on profit booking

MUMBAI, Nov 24 - Indian five-year swap rate fell to its 2-1/2-month low on Tuesday as a rally in bond prices prompted investors to cut earlier paid positions, traders said.

Also, for many investors such as foreign banks preferred to lighten their positions ahead of the year-end on view that policy tightening in India and in major global economies could be later than earlier expected.

"After the bond yields fell, many investors' stop losses were triggered and they just cut their positions," said a senior interest rate trader with a foreign bank.

"I do not think any fresh receiving is happening now."

At 3:10 p.m., the benchmark five-year swap rate <INRAMONMI5Y=> was at 6.50/53 percent, after falling as low as 6.47 percent, a level last seen on Sept. 10.

It closed at 6.54/58 on Monday.

Yield on the benchmark 10-year bond <IN069019G=CC> stayed close to six-week lows on Tuesday as the absence of a bond auction and ample cash levels in the banking system improved market demand for debt. [IN/]

Traders also said some investors who buy 5-year bonds and pay fixed legs in five-year OIS to hedge against losses in bonds started receiving as bond prices rose.

Most analysts do not expect the Indian central bank to hike its key policy rates at the review scheduled late in January.

Total volume in swaps was at 17.50 billion rupees, compared with 11.25 billion rupees at close on Monday. ((boby.michael@thomsonreuters.com; Tel: +91-22-6636 7377; Reuters Messaging: boby.michael.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com))