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Interest Rate Swaps (IRS)
AFMA Swap reference rates are based on ‘mid’ swap spreads against AUD bond futures prices/rates quoted by contributing banks at 10.00 a.m. and 4.45 p.m. daily and are displayed on all approved information vendor systems.
CALCULATION:
10.00a.m. Swaps Fixing
The ‘mid’ swap spread rates provided by the contributing financial institutions (listed below) are added/subtracted to/from the SFE3 year bond futures contract "last traded" price (2-6 yr swaps) and SFE10 year futures contract "last traded" price for (7-15 yr swaps) as at 10.00 a.m. Sydney time, for the 10.00 a.m. reference rates setting. A Yield rate is also given by contribution financial institutions for a 1 year maturity swap.
Contingency procedures in the event of unavailable SFE pricing data
Should for any reason the underlying SFE bond futures contract pricing data be unavailability for sampling at 10.00a.m., then AFMAdata will undertake a manual calculation of a ‘proxy’ SFE 3 year and 10 year bond futures contract price at or around 10.00 a.m. Sydney time, for the 10.00 a.m. swaps reference rates setting.
AFMAdata will ring the contributing banks listed below and obtain an indicative SFE 3 year and 10 year bond futures contract price. From these prices an elimination process will be undertaken to eliminate, the highest and lowest rates for each individual tenor until a minium of six mid-rates remain. The arithmetic average of those remaining mid-rates will then be used as ‘proxy’ for SFE 3 year and 10 year bond futures contract prices in the normal swaps 10.00 a.m. reference rate fixing process.
Given that the Australian Bureau of Statistics (ABS) releases critical economic data at 11.30a.m., any contingency rate fixing arrangements should be completed by 11.00am at the latest.
EOD Price Swaps Fixing
Likewise, the same methodology applies for the end-of-day (EOD) reference rates with the ‘mid’ swap spread rates applied to the closing SFE prices for the 3 & 10 bond contracts to generate the EOD Swap reference rate settings to produce a yield “MID” swap rate. The two highest and two lowest rates are then eliminated for each maturity. A spread is then applied to produce BID/MID/OFFER swaps rates. .A Yield rate is also given by contribution financial institutions for a 1 year maturity swap.
Ineligible Contributions
Contributor rates that are ineligible for inclusion in the SWAPS calculation process include those that:
Elimination & Averaging Procedure
The calculation mechanism uses the mid rates for all input rates. From these mid-rates an elimination process will eliminate, the highest and lowest rates for each individual tenor until a maximum of eight mid-rates remain.
These contributions will then be displayed on page IRSW10AM for 10:00am fixing and IRSWEOD for End of Day fixing.
Note
Rates displayed on page IRSW10AM/IRSWEOD on a row by row basis across all tenors will not necessarily belong to the same contributor.
Before calculating the SWAP rates, the highest and lowest mid-rates are eliminated. The average of the remaining mid-rates will be calculated to three decimal places for each tenor and displayed under the eligible contributor rates on pages IRSW10AM & IRSWEOD respectively.
The ‘average’ mid Swaps rates for each tenor are then calculated to 3 decimal places rounded to the nearest ˝ basis point.
Refer to the diagram below:
BID/OFFER SPREADS:
AFMA Swaps Committee has agreed that the following spreads will be applied to the swap ‘mid’ prices for the purpose of creating BID/OFFER swap revaluations:
These spreads are subject to annual review by the AFMA Swaps Committee
CONTRIBUTING BANKS