Global Rates and FX Primer: Interest rate swaps and swap spreads in Australia 2026

Research evidence excerpt

Global Rates and FX Primer: Interest rate swaps and swap spreads in Australia 2026

Accessible version

Global Rates and FX Primer

Interest rate swaps and swap spreads in

Australia 2026

Primer

Key takeaways 08 July 2026

Rates Strategy• This primer discusses the fundamentals of interest rate swaps and swap spreads in an

Australia

Australian context.

• We outline the main market participants in Australia, the role of BBSW and the key Isabel Hartstein

FX & Rates Strategist

products including swap EFPS. Merrill Lynch (Australia)

isabel.hartstein@bofa.com

• We also present our framework for 10-year swap EFPs, highlighting the main macro

Oliver Levingston

drivers of fair value. FX and Rates Strategist

Merrill Lynch (Hong Kong)

oliver.levingston@bofa.com

The interest-rate swap market in Australia 2026

Interest rate swaps are widely traded derivative contracts that transform fixed interest

Glossary:payments into floating interest payments, and vice versa. Global turnover in single-

currency interest rate swaps was around US$7 trillion per day in April 2025. Of this, BBSW – Bank Bill Swap Rate

AUD-denominated contracts were the fifth most-traded, with daily turnover around EFPs – exchange of future for physical

US$350bn (behind EUR, USD, JPY and GBP).1 Overnight Indexed Swaps (OIS) are a SOFR – Secured Overnight Financing

growing share of AUD-denominated swap turnover, however vanilla interest-rate swaps, Rate

which reference Bank Bill Swap Rate (BBSW), still account for around half of turnover. RBA – Reserve Bank of Australia

Swap and swap spread drivers in Australia BOB – Bank bill – OIS basis

In this primer we review the fundamentals of interest rate swaps and swap spreads, with ASX – Australian Securities Exchange