2026-01-09 10:31:13

Under downward pressure on interest rates, financial institutions are turning to derivatives to maintain profit margins. It is reported that a large infrastructure financing institution in India has recently increased its deployment in this area, engaging in multiple transactions with international banks such as JPMorgan Chase, Standard Chartered, Citibank, and Deutsche Bank.

These trading strategies are not complicated: mainly index swaps and total return swaps, some of which are innovatively linked to local government bonds. As yields on local bonds rise, the profit potential of these swap transactions also expands.

More interestingly, the institution specifically locked in swap contracts with a 10 to 15-year maturity—this approach offers clear benefits, as it better matches the long-term nature of their loans and helps avoid maturity mismatch risks.

The current environment is not easy for institutions. Indian bond market volatility has increased, the uncertainty of future rate cuts is growing, and borrowing costs are rising. In such an environment, proactively hedging with derivatives has become a must for mainstream institutions.

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LightningPacketLoss

· 12h ago

Playing the swap game again, India is also starting to get competitive.

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GateUser-cff9c776

· 01-10 05:52

In essence, it's just playing the old game of maturity mismatch, changing to a new disguise—really a bit of Schrödinger's risk avoidance. I can't believe derivatives can still work so hard to maintain profits; how desperate must that be? From the perspective of supply and demand curves, these Indian institutions are just using hedging to cover up the declining profitability of their core operations. Locking in for 10 to 15 years? Sounds good, but in reality, it's just betting that the market won't collapse in the future. Even Buffett would shake his head at that. When interest rates go down and money disappears, that's when the art of derivatives begins—perfectly illustrating the philosophy of a bear market.

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FrogInTheWell

· 01-09 11:01

It's the same old story of swaps and hedging... Basically, profits are being squeezed, so they have to think of some sneaky tricks, haha.

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DecentralizeMe

· 01-09 11:00

Playing tricks again, when interest rates decline, they turn to derivatives. This routine has been overused in the financial circle.

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BanklessAtHeart

· 01-09 11:00

It's the same old derivatives game. When interest rates go down, new tricks have to be devised. That's the true essence of Wall Street.

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GasFeeCrier

· 01-09 10:54

It's both swaps and hedging. To put it simply, the betting game has escalated. When there's no profit from interest rates, they start playing tricks.

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WalletInspector

· 01-09 10:48

Now I really understand. When interest rates are suppressed, financial institutions have to play derivatives to secure their livelihoods. In India, engaging in swap transactions with JPMorgan and others has long been commonplace. --- Is that all? Index swaps paired with local government bonds are nothing new; it's just a trick of mismatched maturities. --- With the Indian bond market so volatile, daring to lock in contracts for 10 to 15 years is truly bold. --- With unclear expectations of rate cuts and borrowing costs still rising, no wonder institutions have to hedge with derivatives—there's no other way to survive. --- Innovatively linking to local government bonds? Basically, it's betting on the yields of state government bonds, and that risk... --- Financial institutions are really clever. When interest rates fall, they develop new profit spaces. Should we say they truly are JPMorgan's kind? --- Preemptive planning sounds good, but in reality, it's just being forced to operate in such a complex environment. Do we have a choice? --- Locking in swaps with a 10 to 15-year maturity is risky—it's betting that local government bond yields will stay high during that period.

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