View Full Version : So how are Swap Rates set, then ?

GTM 3442
26-11-2009, 07:47 PM
Evenin', team . . .

Various NZDX perpetuals (and even long-term non-perpetuals) have a regular rate reset at a margin ovet one of the swap rates.

How are the swap rates "set", and how dependent are they (formally or otherwise) on the OCR.

Can we have a situation where the OCR moves in one direction, but the swap rates don't follow - or even move the other way ?

Yours in ignorance. . . . GTM3442

27-11-2009, 07:21 AM
Swap rates are 'set' in similar fashion as the 30/60/90/180 day bank bill rate, LIBOR, and all the other interest rate products around the globe - a panel of banks submit rates to Reuters or Bloomberg at a set time each day - these are published with an average for bid and offer, and any rate sets in the primary issue markets are based off either bid/mid or offer depending on underlying rate set arrangements. This method has been in place since time immemorial, and remains the accepted basis for determining binding rate sets as required.