Indian swap rates end higher on bond sell-off, oil

MUMBAI, Nov 23 - Indian overnight indexed swap rates ended higher in thin trade on Monday on the back of higher bond yields and on rising oil prices.

"Many investors expect the profit booking in bonds to continue in the coming days, prompting them to take fresh paid positions in swaps," said a trader at a private bank.

Some traders said higher oil prices also supported the paying interest on Monday.

High oil prices could fuel inflation worries in the domestic economy, which may prompt the central bank to tighten the monetary policy sooner.

The benchmark five-year swap <INRAMONMI5Y=> ended at 6.54/58 percent, from Friday's close of 6.50/54 percent.

Yield on the 10-year benchmark bond, which had fallen by 14 basis points to 7.18 percent last week, rose to 7.22 percent on Monday due to profit taking. [IN/]

Oil prices rose more than 1 percent to move above $78 a barrel on Monday due to weakness in the dollar and signs of buoyant demand from China. [O/R]

Although there is no bond auction scheduled for this week, the central bank will auction 67.16 billion rupees of state loans on Tuesday and 70 billion rupees of treasury bills on Wednesday.

Traders said swap rates are expected to be largely range-bound until there are fresh cues with regard to the central bank's monetary policy.

They also expect less activity in the coming weeks as many banks would not be adding fresh positions ahead of the calendar year end.

One-year swap <INRAMONMI1Y=> closed at 4.58/62 percent, up from Friday's closing of 4.56/59.

Total volume in swaps at the central bank reporting platformwas just at 10.25 billion rupees, compared with 44 billion rupees on Friday. ((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))