MUMBAI: Indian Overnight Indexed Swaps fell on Monday aided by the drop in global oil prices with the short-end of the curve dropping more on expectations that the central bank may pause its rate increase cycle at the Sept. 16 policy review. "For the market, a rate hike is off the table now and the curve is expected to steepen with a bigger drop in short-end rates," said a senior trader with a foreign bank. At 10:35 a.m., the one-year rate was down 11 basis points on the day at 7.60 per cent. The benchmark five-year overnight indexed swap rate was down 6 basis points on the day at 6.68 per cent. The negative spread between the two rates was at 92 basis points. "The spread is really wide and there will be some readjustment with people paying the 5 year and receiving the 1-year," said another foreign bank dealer. India's central bank on Thursday said four members of its technical advisory panel on monetary policy had suggested a pause in rate hikes for the July 26 policy review, while two members said a rate hike could be avoided if possible. The central bank had delivered a stronger-than-expected 50 basis points rate increase at the July 26 policy review and some traders now feel that the it may pause in the light of a bleak global economic outlook. Brent crude dropped more than $2 on Monday to around $106 a barrel on the potential for a resumption of exports from OPEC-member Libya as a six-month civil war there appeared close to an end. Volumes were a low 3.50 billion rupees on the central bank's trading platform.

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