Swap spread: Difference between revisions

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Revision as of 22:22, 19 June 2010

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In finance, '''swap spread''' is a popular way to indicate the [[credit spreads]] in a market. It is defined as the spread paid by the fixed-rate payer of an [[interest rate swap]] over the rate of the [[On the run (finance)|on- the- run]] [[US Treasury|treasury]] with the same maturity as the swap. For example, if the fixed-rate of a 5-year swap is 7.26% and the 5-year Treasury is yielding at 6.43%, the swap spread is 7.26% - 6.43% = 83 [[basis point|bps]].

Swap spread became a popular indication of credit spread in Europe during the 1990s.