Investors in Australia trying to understand the interest rate securities market will often come across reference to 90 Day Bank Bill Futures. Launched in 1979, the 90 Day Bank Bill was the first interest rate futures contract to be listed outside the US.
The Australian Securities Exchange’s 90 Day Bank Bill Futures and Options product is used as a benchmark indicator for short term interest rates in Australia. Investors use the 90 Day Bank Bill contract as a means of enhancing portfolio performance, reducing and managing risk and outright trading. Investing in 90 Day Bank Bill Futures provides allows investors to gain exposure to the Australian debt markets.
The trading behaviour and liquidity of these instruments means that they can be used for the hedging of short term AUD fixed interest securities and interest rate swaps. The average daily turnover of these contracts in 2012 was 83,000 contracts, seven times the turnover of the underlying cash market.
How to buy and sell 90 Day Bank Bill Futures
Trading in 90 Day Bank Bill Futures and Options is conducted ‘on market’ via the ASX’s electronic platform and ‘off market’ through Exchange for Physicals (EFP) transactions.
Each contract is for $1,000,000 face value. Prices are quoted in yield per cent per annum, multiples of .01 per cent. Contracts exist for the months of March (H), June (M), September (U) and December (Z) up to 20 quarter months or five years ahead. The deliverable product for the 90-day Bank Accepted Bills Futures contract is 90 Day Bank Accepted Bills of Exchange.