What’s the Bank Bill Swap Rate (BBSW) & How Does it Work?

You might have heard of the term “Bank Bill Swap Rate” (or BBSW) before, but what does it actually mean and why is it important? In this guide, we’ll explain everything you need to know about the BBSW, including how it’s calculated and what it means for your finances.


What is the BBSW?

The BBSW is the rate at which banks swap Australian dollar-denominated cash flows. This rate is used as a benchmark for a wide range of financial products, including loans, derivatives, and securities.


Why is the BBSW important?

In a nutshell, the BBSW serves as a key indicator of financial market conditions – therefore, it’s closely watched by investors, analysts, and central banks.

For example, when you take out a home loan, the interest rate you pay will be based on the current BBSW plus a margin. The size of this margin will depend on a number of factors, including your credit history and the type of loan you are taking out. The BBSW can also affect your investments – if you have an investment portfolio with exposure to interest rates, changes in the BBSW will impact the value of your investments.

The BBSW is also important for businesses that borrow money from banks, as the interest rate they pay will be based on BBSW plus a margin. In the case of a business, the size of the margin will depend on factors like the type of business, its credit history, and the terms of the loan.


How is the BBSW calculated?

The BBSW is calculated by the Australian Financial Markets Association (AFMA), which is a non-profit industry body that represents the interests of the Australian financial markets. AFMA uses data from a panel of banks to calculate the BBSW; working closely with market participants to promote efficient, fair, and transparent financial markets.

The AFMA settlement price for BBSW is calculated using trading data submitted by AFMA members. This data is used to determine the volume-weighted average price (VWAP) of bank bills traded during the AFMA settlement period (between 10:00am and 4:00pm on business days).

Banks submit their trades to AFMA electronically via an approved electronic clearing house or broker. Once all trades have been submitted, AFMA calculates the VWAP and publishes the results on its website at 10:00am Sydney time each business day.


Make more informed financial decisions, with Perry Finance

The Bank Bill Swap Rate (BBSW) is an important benchmark interest rate in Australia that impacts both individuals and businesses. By understanding how the BBSW works and how it affects your finances, you can make more informed decisions about your money.

At Perry Finance, we pride ourselves on our extensive experience as a credit advisory firm servicing property investors, business owners and developers. When it comes to matters like the BBSW, our brokers will work closely alongside you to achieve the best possible financial outcomes for your business and its investments.

To discuss our commercial loans, development finance and other funding solutions, don’t hesitate to contact us today.


News & Resources