Summary: Bank bill and BBSW rates lower; swap rates fall at front of curve but increase elsewhere; swap spreads to ACGB yields lower but not at “belly”.
The physical bank bill rate shed 2bps to 0.06%, as did 3-month BBSW. 6-month BBSW lost 4bps to 0.07%.
Swap rates fell at the front of the curve but rose for longer tenors elsewhere. By the end of the week, 1-year and 3-year rates had each lost 2bps to 0.04% and 0.09% respectively, the 5-year rate had gained 3bps to 0.26%, the 10-year rates had increased 9bps to 0.77% while the 15-year rate finished 10bps at 1.08%.
As a result, swap spreads generally fell but not at the “belly”. By the end of the week, the 3-year spread had fallen by 3bps to -4bps, the 5-year rate had gained 1bp to -4bps while the 10-year spread finished 5bps lower at -9bps.
Prima facie, a negative spread implies banks are lower risks than the Commonwealth Government. However, short-term factors such as the Government’s rate of issuance relative to that of banks can play a part.
BBSW - SWAP RATES
| TERM TO MATURITY | Closing Rate | Δ WEEK | Δ MONTH |
|---|---|---|---|
| 30 Day | 0.07 | -0.01 | -0.02 |
| 90 Day | 0.06 | -0.02 | -0.03 |
| 180 Day | 0.07 | -0.04 | -0.06 |
| 1 Year | 0.04 | -0.02 | -0.05 |
| 3 Year | 0.09 | -0.02 | -0.07 |
| 5 Year | 0.26 | 0.03 | -0.07 |
| 10 Year | 0.77 | 0.09 | -0.04 |
| 15 Year | 1.08 | 0.10 | -0.02 |