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?
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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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$\begingroup$ It is funny how financial markets work: if you see a big swap rate of course you want to receive and as you (and others) increase your position more and more you find that the swap rate moves against you, making it less attractive. It is unfortunate, but that is how all systems subject to equilibrium tend to work, action leads to reaction that lowers the reward to the initial action. The attractiveness of a particular trade tends to disappear when acted upon by enough ppl. $\endgroup$– nbbo2Commented Nov 7, 2022 at 13:05
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$\begingroup$ @dm63 Can you please elaborate on your answer keeping in reference my question $\endgroup$ Commented Nov 9, 2022 at 7:26
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$\begingroup$ I thought the comment of @nbbo2 was a good elaboration $\endgroup$– dm63Commented Nov 10, 2022 at 3:39