Summary: Bank bill and BBSW rates unchanged; swap rates rise along curve; swap spreads to ACGB yields down a little, all still close to zero.
The physical bank bill rate finished the week unchanged at 0.02%, as did 3-month BBSW. 6-month BBSW also finished unchanged, 1bp higher than 3-month BBSW at 0.03%.
Swap rates rose along the curve, largely in line with their Commonwealth Government counterparts. By the end of the week, 1-year and 3-year rates had crept up 1bp to 0.04% and 0.14% respectively, the 5-year rate had increased by 3bps to 0.36%, while 10-year and 15-year rates finished 8bps higher at 0.96% and 1.32% respectively.
As a result, swap spreads declined a little but remained quite close to zero. By the end of the week, 3-year and 5-year spreads had each decreased by 1bp to +1bps and +2bps respectively while the 10-year spread finished 2bps lower at -4bps.
Prima facie, a negative swap spread implies banks are a lower risk than the Commonwealth Government. However, short-term factors such as the Government’s rate of issuance or a lack of demand by banks for funding can play a part.
BBSW - SWAP RATES
| TERM TO MATURITY | Closing Rate | Δ WEEK | Δ MONTH |
|---|---|---|---|
| 30 Day | 0.02 | 0.00 | -0.03 |
| 90 Day | 0.02 | 0.00 | -0.04 |
| 180 Day | 0.03 | 0.00 | -0.04 |
| 1 Year | 0.04 | 0.01 | 0.00 |
| 3 Year | 0.14 | 0.01 | 0.05 |
| 5 Year | 0.36 | 0.03 | 0.10 |
| 10 Year | 0.96 | 0.08 | 0.19 |
| 15 Year | 1.32 | 0.08 | 0.23 |