Summary: Bank bill and BBSW rates slip; swap rates fall by increasing amounts along curve; short-to-medium term swap spreads to ACGB yields less negative.
The physical bank bill rate slipped 1bp to 0.08%, as did 3-month BBSW. 6-month BBSW also slipped 1bp to 0.12%.
Swap rates fell by increasing amounts along the yield curve. By the end of the week, 1-year rate and 3-year rates had each shed 2bp to 0.07% and 0.14% respectively, the 5-year rate had lost 4bps to 0.29%, the 10-year rate had fallen by 6bps to 0.75% while the 15-year rate finished 7bps lower at 1.03%.
As a result, swap spreads became less negative. By the end of the week, the 3-year spread had increased by 4bps to -3bps while 5-year and 10-year spreads each finished 3bps higher at zero and -5bps respectively.
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 | 0.09 | 0.00 | 0.00 |
| 90 Day | 0.08 | -0.01 | -0.02 |
| 180 Day | 0.12 | -0.01 | -0.04 |
| 1 Year | 0.07 | -0.02 | -0.05 |
| 3 Year | 0.14 | -0.02 | -0.06 |
| 5 Year | 0.29 | -0.04 | -0.08 |
| 10 Year | 0.75 | -0.06 | -0.04 |
| 15 Year | 1.03 | -0.07 | 0.00 |