Glossary
Bank bill swap rate (BBSW)
The wholesale benchmark larger commercial facilities are priced against, with the lender's margin added on top.
In plain English
BBSW is a published benchmark for what banks charge each other for short-term funds in the Australian market. Larger commercial facilities are commonly priced as BBSW plus a margin, so the rate has two moving parts: a benchmark nobody in the room controls, and a margin that is negotiated.
Smaller facilities are more often priced off a lender's own reference rate instead, which behaves similarly from the borrower's side but is set by the lender rather than published. You will also see BBSY, which is the same benchmark quoted on a different side of the market and is the one that usually appears in lending documents.
Why a lender cares
Splitting the rate into benchmark and margin tells you which half is worth negotiating. If the benchmark moves, everyone's pricing moves with it, and a lender holding its margin steady through that is not the same as a lender that has repriced you. Ask which component changed before assuming you have been treated badly.
Where this term takes you
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