What is the 'Bank Bill Swap Bid Rate - BBSY'
The Bank Bill Swap Bid Rate (BBSY) is a benchmark interest rate quoted and dispersed by Reuters Information Service. The BBSY is typically used by financial institutions or corporations engaging in interest rate swaps and related transactions.
BREAKING DOWN 'Bank Bill Swap Bid Rate - BBSY'
A good example of where the bank bill swap bid rate comes into play in an interest rate based transaction is an interest rate cap agreement. In this type of agreement, one party in a swap remits payments to another party if the prevailing interest rate is above or below a certain value. In order to decide what interest rate is used to determine the payment amounts in the agreement, the BBSY is agreed upon at the inception of the agreement as the reference rate.