The Federal Government’s Use of Interest Rate Swaps and Currency Swaps

John Kiff (), Uri Ron and Shafiq Ebrahim
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Shafiq Ebrahim: Bank of Canada, https://www.bankofcanada.ca/

Bank of Canada Review, 2001, vol. 2000-2001, issue Winter, 23-34

Abstract: Interest rate swaps and currency swaps are contracts in which counterparties agree to exchange cash flows according to a pre-arranged formula over a period of time. Since 1985, the federal government has been us-ing such swaps to manage its liabilities in a cost-effective and flexible manner. The authors outline the characteristics of swap agreements and the ways in which the government uses them. They show that the swap program has been cost-effective, estimating that past and projected savings exceed $500 million. The authors also discuss the methods that the government uses to monitor the counterparty credit risk associated with these transactions.

Date: 2001
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