US banking crisis: Key interest rates suggest RBI may go slow on tightening

The fall in OIS rates mirrored a decline in the 10-year US bond yield, which plunged close to 40 bps after the collapse of SVB

The crisis in the US banking sector, triggered by the collapse of Silicon Valley Bank (SVB), has had a knock-on effect on a key domestic interest rate metric. This, apparently, suggests a less aggressive future quantum of tightening by the Reserve Bank of India (RBI).

Overnight indexed swap (OIS) rates, which are the primary instruments for hedging interest rate risk in India, have plummeted by around 34 basis points (bps) since March 9. This was when the turmoil in the US banking sector started unfolding.

The two most-liquid OIS products — the one-year and five-year swaps — have fallen 33