Summary: Bank bill and BBSW rates down; swap rates fall modestly; swap spreads to ACGB yields barely change except at long end, still negative.
The physical bank bill rate finished the week 4bps lower at 0.02%, as did 3-month BBSW. 6-month BBSW also finished 4bps lower, 1bp higher than 3-month BBSW at 0.03%.
Swap rates fell modestly. By the end of the week, the 1-year rate had lost 2bps to 0.02%, the 3-year rate had slipped 1bp to 0.08%, 5-year and 10-year rates had shed 3bps to 0.23% and 0.74% respectively. The 15-year rate finished 2bps lower at 1.07%.
As a result, swap spreads barely changed except at the long end where they increased. By the end of the week, the 3-year spread had increased by 1bp to -2bps, the 5-year rate had decreased by 1bp to -3bps while the 10-year spread finished 4bps higher at -2bps.
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 | 0.02 | -0.03 | -0.07 |
| 90 Day | 0.02 | -0.04 | -0.07 |
| 180 Day | 0.03 | -0.04 | -0.09 |
| 1 Year | 0.02 | -0.02 | -0.06 |
| 3 Year | 0.08 | -0.01 | -0.05 |
| 5 Year | 0.23 | -0.03 | -0.06 |
| 10 Year | 0.74 | -0.03 | -0.01 |
| 15 Year | 1.07 | -0.02 | 0.04 |