Summary: Bank bill and BBSW rates unchanged; swap rates rise by increasing amounts along curve; swap spreads to ACGB yields up modestly except at long end, still negative.
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 by increasing amounts along the curve. By the end of the week, the 1-year rate remained unchanged at 0.02%, the 3-year rate had added 3bps to 0.11%, the 5-year rate had gained 6bps to 0.29%, the 10-year rate had increased by 9bps to 0.83% while the 15-year rate finished 12bps higher at 1.19%.
While rates increased, they did not track their Commonwealth Government counterparts. As a result, swap spreads increased except at the long end where they fell further below zero. By the end of the week, the 3-year spread had increased by 1bp to -1bp, the 5-year rate had added 2bps to -1bp while the 10-year spread finished 4bps lower at -6bps.
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 | -0.07 |
| 90 Day | 0.02 | 0.00 | -0.06 |
| 180 Day | 0.03 | 0.00 | -0.08 |
| 1 Year | 0.02 | 0.00 | -0.05 |
| 3 Year | 0.11 | 0.03 | -0.02 |
| 5 Year | 0.29 | 0.06 | 0.00 |
| 10 Year | 0.83 | 0.09 | 0.06 |
| 15 Year | 1.19 | 0.12 | 0.12 |