Interest Rate Derivatives

Interest rate derivative products and services are only available to South Australian public sector agencies, within the confines of the Government Financing Authority Act 1982, and applicable approvals of the Treasurer of South Australia.

SAFA offers a range of interest rate derivative products to assist agencies in managing their interest rate exposure. Agencies will require the Treasurer's approval before entering into derivative products.

Interest rate swaps allow agencies to change the nature of their interest rate obligations by swapping them into fixed rates or floating rates with a different frequency.

Interest rate bank bill futures allow agencies to hedge short-term interest rates for periods of 3 months, and bond futures allow agencies to hedge long-term rates for periods of 3 or 5 years. Interest rate futures are traded on the Sydney Futures Exchange and trade in fixed face value amounts and fixed dates.

A FRA allows agencies to hedge short-term interest rates, similar to interest rate futures. They have greater flexibility in terms of the dates that the hedge is required and the face value of the FRA.

Interest rate options can be purchased to protect Client's against adverse movements in interest rates. They can be tailored to protect a short period of time or a longer period of time. In exchange for the protection, the Client is required to pay an upfront premium.

SAFA's Client Services team can be contacted on (08) 8226 9452