What moves benchmark money market rates? Evidence from the BBSW market

Casavecchia, L; Loudon, GF; Wu, E

What moves benchmark money market rates? Evidence from the BBSW market

Casavecchia, L

Loudon, GF Wu, E

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Publication Type:: Journal Article
Citation:: Pacific Basin Finance Journal, 2018, 51 pp. 137 - 154
Issue Date:: 2018-10-01

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Field	Value	Language
dc.contributor.author	Casavecchia, L https://orcid.org/0000-0003-1452-3059	en_US
dc.contributor.author	Loudon, GF	en_US
dc.contributor.author	Wu, E	en_US
dc.date.issued	2018-10-01	en_US
dc.identifier.citation	Pacific Basin Finance Journal, 2018, 51 pp. 137 - 154	en_US
dc.identifier.issn	0927-538X	en_US
dc.identifier.uri	http://hdl.handle.net/10453/133146
dc.description.abstract	© 2018 Elsevier B.V. In this study we examine the daily movements of a benchmark interest rate using the bank bill swap rate (BBSW) over the period from 2006 to 2016. By decomposing the BBSW into its credit risk and liquidity risk components we reveal that the relative importance of these priced components are conditional on economic uncertainty. Although the compensation required for credit risk increased markedly during the period 2007–2009, the liquidity risk component exerted a disproportionately stronger effect on short-term BBSW spreads relative to credit risk. Our findings show that using a market-based approach to setting credit-based benchmark interest rates introduces both a liquidity and credit risk premia into benchmark interest rates, and both of these risk premia are affected by market forces.	en_US
dc.relation.ispartof	Pacific Basin Finance Journal	en_US
dc.relation.isbasedon	10.1016/j.pacfin.2018.06.005	en_US
dc.subject.classification	Finance	en_US
dc.title	What moves benchmark money market rates? Evidence from the BBSW market	en_US
dc.type	Journal Article
utslib.citation.volume	51	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Finance Discipline
utslib.copyright.status	closed_access
pubs.publication-status	Published	en_US
pubs.volume	51	en_US

Abstract:

© 2018 Elsevier B.V. In this study we examine the daily movements of a benchmark interest rate using the bank bill swap rate (BBSW) over the period from 2006 to 2016. By decomposing the BBSW into its credit risk and liquidity risk components we reveal that the relative importance of these priced components are conditional on economic uncertainty. Although the compensation required for credit risk increased markedly during the period 2007–2009, the liquidity risk component exerted a disproportionately stronger effect on short-term BBSW spreads relative to credit risk. Our findings show that using a market-based approach to setting credit-based benchmark interest rates introduces both a liquidity and credit risk premia into benchmark interest rates, and both of these risk premia are affected by market forces.

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http://hdl.handle.net/10453/133146