Overnight Index Swap


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Overnight Index Swap

A short-term, plain vanilla swap in which the legs are a fixed interest rate and the current rate for an overnight loan. As with all interest rate swaps, an overnight index swap is calculated over some notional amount.
References in periodicals archive ?
Overnight index swaps jumped to 99bps of rate hikes over the next twelve month from 85 yesterday.
Overnight index swaps from Credit Suisse are pricing in 85.
Trading in overnight index swaps suggests traders are pricing the likelihood that the RBA will raise rates by 175-200 basis points over the next 12 months.
As it stands, Credit Suisse Overnight Index Swaps (OIS) are pricing in a 60 percent chance of a 25 basis point rate hike during this upcoming meeting - which we think to be highly unlikely - and 175 basis points worth of hikes over the next 12 months, which is generally in line with what we've seen since early August.
Meanwhile, Credit Suisse overnight index swaps are up 187bp this month as the RBA maintains a neutral policy stance, and long-term expectations for higher borrowing costs is likely to drive the aussie-dollar higher as investors speculate the central bank to tighten policy over the next 12 months.
The pair continues to see little relationship with interest rate expectations with overnight index swaps holding only a 0.
As it stands, Credit Suisse overnight index swaps are pricing in a 126 basis points worth of hikes by the Reserve Bank of New Zealand over the next 12 months - the most since at least 2006 - but if New Zealand GDP falls more than expected, expectations could reverse and weigh on the New Zealand dollar.
At their peak, Overnight Index Swaps were pricing in an approximate 50 percent chance that the Reserve Bank would raise interest rates as soon as October.