GSec OIS Arbitrage
Existence for long time
G Sec OIS arbitrage has been in existence for long time. Till date only banks and few large NBFCs have taken advantage of this opportunity.
Let’s dive into what GSec OIS Arbitrage is and how we can help you benefit from it.
GSec OIS Arbitrage is similar to cash future arbitrage in Equity. In this strategy, the first leg involves buying a G-Sec (e.g., a 5-year G-Sec at 7%) and funding it through the overnight repo market for the next 5 years theoretically. However, the overnight rate could go beyond the G-Sec’s original buying rate, resulting in loss.
GSec OIS Arbitrage opportunity and grow your wealth
To hedge against the overnight rate risk, we enter into an OIS (Overnight Indexed Swap) for 5 years (e.g., a 5-year OIS at 6.1%). This gives an opportunity to lock in the spread income between G-Sec and OIS for 5 years (e.g., 7% – 6.1% = 0.9%). The trade is unwound when this spread reduces, ideally to 0.2% to 0.3%, or can be carried till maturity with fixed returns.
This strategy can generate an ROE of 20%-25% year on year or even higher. Historically it has generated 40%+ IRR as almost all the times this arbitrage converges quickly. Our team of experts will help you execute this strategy end to end with precision and expertise, ensuring that you benefit from this opportunity with minimal risk.
If above seem too technical, please give a shout to us. Contact us to learn more about how we can help you capture the GSec OIS Arbitrage opportunity and grow your wealth.