What Is the Bank Bill Swap Bid Rate (BBSY)? 

The Bank Bill Swap Bid Rate (BBSY) is an Australian benchmark interest rate quoted and dispersed by the data provider Thompson Reuters Information Service. The BBSY is typically used by financial institutions or corporations engaging in intere༺st rate swaps and related transactions.

Understanding BBSY

In Australia, the BBSY is the interest rate used in the financial markets for the pricing and valuation of Australian dollar securities and used by banks to borrow money and to determine short-term floating interest rates. The BBSY is Ltd, which operates Australia's primary national st✱ock exchange and equity derivatives market.

The BBSY is publishe🐼d at 10:15 a.m. daily on Thomson Reuters and on Bloomberg LLP. The published rates are used by financial institutions nationally to calculate interest rates on financial contracts, making for a transparent and efficient process in the country’s financial system.

The BBSY is used as the base rate for debt financing. It is similar to the 澳洲幸运5开奖号码历史查询:London Interbank Offer Rate (LIBOR). The BBSY is derived from the BBSW—澳洲幸运5开奖号码历史查询:Bank Bill Swap Rate—which is calculated as the average of the national best bid and best offer (NBBO), rounded to four decima🅷l places.

This average mid-price is made available by independent authorities using a transparent algorithm based on information from numerous financial institutions. The BBSY is calculated and provided in a similar manner, except inst🌱ead of mid-price, the average bid-price is used.

Example of the BBSY

A good example of where the bank bill swap bid rate comes into play is in a 澳洲幸运5开奖号码历史查询:plain vanilla interest rate swap agreement. An interest rate swap is a contract entered into by two counterparties who agree to swap streams of interest payments with each other for a predetermined period of time. One party swaps 澳洲幸运5开奖号码历史查询:fixed-interest payments and receives floating interest payments that are dependent on the movement of the BBS🅘Y.

In order to decide what interest rate is used to determine the payment amounts in the agreement, the BBSY is agreed upon at the inception of the agreement as the reference rate. The floating rate used in interest rate swaps is BBSY plus (or minus) a margin, e.g. BBSY + 35 basis points.

Consider two companies who enter into an interest rate swap in which company XYZ pays fixed payments to and receives floating payments from company ABC. The semi-annual fixed interest rate is 2%, and the floating rate is BBSY + 0.35% to be paid on a semi-annual basis. Payments are to be swapped on a 澳洲幸运5开奖号码历史查询:notional principal amount of $1 million. On the day the payment amount is calculated XYZ will pay ½ x 2% x $1 million = $10,000 to ABC. Assuming thꦇe BBSY is 1.90%, ABC will remit ½ x (1.90% + 0.35%) x $1 million = $11,250 to XYZ.