But in other cases, a credit-based benchmark, like BBSW will continue to make sense. Floating rate notes and corporate loans issued by banks are examples of this. But as I’ve said before, not all BBSW tenors are as robust as others.5 In particular, the 1month BBSW is largely a buy-back market. Accordingly, it is less liquid than other tenors.
So users of 1-month BBSW should be considering using alternative benchmarks given the lack of liquidity in this market. It’s also worth noting that for some products, approaches adopted widely by market participants offshore will have an important bearing on the reference rates we are likely to end up using here.