Uri Ron

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Bank of Canada Review articles

December 15, 2000

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

Bank of Canada Review - Winter 2000-2001 John Kiff, Uri Ron, Shafiq K. Ebrahim
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 using 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.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Interest rates

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