Rate swap traders bet on 50 bps cut in February on global dovish tilt
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The Reserve Bank of India's commentary and inflation forecasts may not provide visibility on when rates may fall but swap traders are betting on a 50 basis-point cut in local borrowing costs starting February 2025 as central banks globally start tilting towards a softer monetary policy. A basis point is a hundredth of a percentage point. Overnight indexed swap (OIS) rates, the principal financial market tool for betting on interest rate expectations, have fallen by 20-30 basis points in the past month, with their current levels reflecting the start of a policy easing cycle by the central bank in the first quarter of 2024. ETMarkets.com "The relevant swap is the one-year OIS, which is hovering around 6.53%. The compounding is around 22 basis points, so effectively the fixing for it to break even needs to be around 6.25-6.30%. If we go with that, then it's factoring in a rate cut of around 50 basis points (bps) after six months...