BBSW: Definition & Meaning | Bondfish
BBSW (Bank Bill Swap Rate) is the benchmark interest rate for short-term Australian dollar money markets, reflecting the cost for highly rated banks to issue short-term bank bills.
What it means
BBSW is calculated daily from executable bid and offer quotes for bank bills across tenors from one to six months, administered by the ASX under regulatory oversight. It functions as Australia's equivalent of what LIBOR once was for the U.S. dollar and sterling markets: the reference rate that floating-rate notes, corporate loans, and interest-rate swaps in Australian dollars are priced against.
BBSW typically trades a small margin above the Reserve Bank of Australia's (RBA) official cash rate, reflecting the credit and liquidity premium banks charge each other for short-term funding. As of late September 2026, BBSW stood around 4.76%, versus an RBA cash rate of 4.60%.
Why it matters for bond investors
If you hold an Australian dollar floating-rate note (FRN), your coupon is typically set as "BBSW + a fixed margin," reset periodically (often quarterly). That means your income moves directly with Australian money-market conditions rather than staying fixed, which can be an advantage when the RBA is raising rates and a drag when it is cutting them.
Example
FRN coupon = BBSW (3-month) + credit spread
Example: 4.76% + 1.20% = 5.96% annualized, reset quarterly
Related terms
This definition is for general information only and is not investment advice. Bond investing involves risk, including possible loss of principal.