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How OIS Swap Trading Affects Swap Rates Through Supply and Demand

Article Quant Q&A · Author: user2967440
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Summary

The document asks why an article says receiving OIS swap rates pushes swap rates lower, while paying them pushes rates higher. The response gives a basic supply-and-demand explanation: when market participants take positions that increase demand for one side of a swap, the price adjusts in that direction, much as heavier buying can lift a stock’s price.

This is an intuitive one-line explanation rather than a detailed account of swap-market mechanics. It does not specify the perspective from which receive and pay are described, explain how dealer intermediation or hedging transmits flows to quoted rates, or provide market evidence. The directional claim is therefore presented without a fuller treatment of conventions, trade size, liquidity, or other factors that can affect observed OIS rates.

Key ideas

  • The response explains rate movements with a basic supply-and-demand analogy.
  • Receiving and paying OIS are associated in the question with opposite directions in swap rates.
  • The document does not detail the market mechanics or provide evidence for the asserted relationship.
  • Trade conventions, liquidity, and hedging are not addressed.

Tags

Fixed incomeMarket microstructureExecution
Full text
# How OIS swap rates behave when we receive or pay OIS swap rates?


# How OIS swap rates behave when we receive or pay OIS swap rates?












I am reading a news article regarding how OIS swap rates behave when we receive or pay OIS swap rates. The article states that when we receive OIS swap rates it makes swap rates fall. When we pay swap rates, the swap rates rise. What would be a logical explanation for this?

## Answer by dm63 (score 1)

https://quant.stackexchange.com/a/73719

This is just simple supply and demand. Same as saying that if people buy a lot of stock X , the price goes up.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.