FIIG - The Fixed Income Experts

The Bank Bill Swap Rate, commonly known as BBSW, is simply the short term swap rate. In Australia, BBSW is the term used for interest rate swaps of six months or less, anything dated longer than six months is simply referred to as a swap rate.

While BBSW has many uses, for fixed income investors its main relevance is as a benchmark upon which we can evaluate floating rate bonds or investments.


An interest rate swap is a financial instrument where one entity swaps a stream of floating interest payments for another entity’s fixed interest payments. In practice, they do not make two payments. Rather, a single net payment is made.


As of 1 January 2017, AFMA handed over responsibility for calculating BBSW to the Australian Stock Exchange. The process has been evolving and in May 2018 was confirmed in a paper ASX BBSW Trade and Trade Reporting Guidelines.

In an ASIC media release dated Monday 21 May 2018, they commented:

The bank bill swap rate (BBSW) rate is a major interest rate benchmark for the Australian dollar and is widely referenced in many financial contracts. Previously, BBSW was calculated from the best executable bids and offers for Prime Bank securities. A major concern over recent years has been the low trading volumes during the rate-set window, the period over which the BBSW is measured.

The new BBSW methodology calculates the benchmark directly from market transactions during a longer rate-set window and involves a larger number of participants. This means that the benchmark is anchored to real transactions at traded prices. ASX, the administrator of BBSW, has consulted market participants on this new methodology. In addition, the ASX has recently conducted a successful parallel run of the new methodology against the existing method.

BA Deputy Governor Guy Debelle said,

‘The new methodology strengthens BBSW by anchoring the benchmark to a greater number of transactions. This should help to ensure that BBSW remains robust.’

BBSW Waterfall

Stage 1. Volumne Weighted Average Price (VWAP) is based on actual transactions in eligible securities that occur during the rate set window of 8:40:00 am to 10:00:00 am

Stage 2. National Best Bid and Offer (NBBO) - The current methodology, which uses live exectutable bids and offers to calculate BBSW, will operate only if Stage 1 fails to form BBSW

Stage 3. Algorithmic calculation - this would draw on relevant market pricing information that is available only in the circumstance where both Stage 1 and Stage 2 fail to form BBSW

Key points to note

  • Prime Banks are required to show two way markets throughout the Rate Set Window on recognised
  • Approved Trading Venues (ATVs) from 8:40:00am till 10.00:00am in accordance with the ASX Prime Bank Conventions
  • Internal Trades of Market Participants must not be reported for the purpose of BBSW calculation
  • For the purpose of BBSW calculation eligibility, the minimum parcel size is $10m
  • The Administrator will, in respect of Eligible Trades reported to the Administrator during the Trade Reporting Window on a day, calculate and publish the BBSW for that day by 10:30:00am on that day
  • When determining an outright rate (including the rate of a bid or offer entered on an ATV) a Market Participant should have regard to its genuine business purposes. This may involve taking into account factors such as: -
  • its genuine business purposes to buy or sell Bank Paper
  • underlying liquidity
  • investment demand to buy or sell Bank Paper
  • volume of Bank Paper to be traded
  • size of flow or enquiry
  • consistent pricing relativities to other related financial instruments
  • market environment 
  • A record should be kept of the rationale for any transaction at a price which is materially different from the current market price

 For more information, see FIIG’s news article, ‘BBSW changes complete’, ASX- BBSW Conventions, the ASX and ASIC websites.


‘Bid’ and ‘Ask’ values for each BBSW tenor are published on Thomson Reuters page ‘BBSY’ and on Bloomberg LLP page ‘ASX29’ using a set difference respectively of five basis points above and below the BBSW rate.

The Bid and Ask values of BBSW as published on these pages are used, amongst other things, by market participants to price floating rate loans. Being directly derived from BBSW and where the only difference is the predetermined and non-variable bid / ask spread to BBSW, rates published on BBSY and ASX29 are a familial derivative of BBSW and not a separate benchmark.

The ten (10) basis point spread between the Bid and Ask values may not be changed without the express consent of ASX, and consideration of any change to this spread must be subject to prior consultation with the Committee and market participants.

BBSW on a 24 hour delayed basis is available here.

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