Swap spread: Difference between revisions

Revision as of 18:57, 18 March 2020

Revision as of 20:50, 5 March 2021

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{{Underlinked|date=October 2019}}

'''Swap spreads''' are the difference between the '''[[swap rate]]''' (a fixed interest rate) and a corresponding '''government bond yield''' with the same maturity ([[United_States_Treasury_security#Treasury_bond|Treasury securities]] in the case of the United States).<ref>{{Cite web|url=https://www.thestreetcfainstitute.comorg/tsclearning/basicsproducts/tscglossarypublications/Swaps&_SwapSpreadsinv/Documents/fixed_income_chapter10.htmlppt|title=The term structure and interest rate dynamics Chapter 10|publisher=CFA Institute}}</ref>

swaps and swap spreads|publisher=The Street}}</ref><ref>{{Cite web|url=https://www.cfainstitute.org/learning/products/publications/inv/Documents/fixed_income_chapter10.ppt|title=The term structure and interest rate dynamics Chapter 10|publisher=CFA Institute}}</ref>

For example, if the current market rate for a 5-year swap is 1.35 percent and the current yield on the 5-year Treasury note is 1.33 percent, the 5-year swap spread would be 0.02 percentage points, or 2 basis points.<ref>{{Cite web|url=http://faculty.mccombs.utexas.edu/keith.brown/Research/JFI-03.94.pdf|title=an empirical analysis of interest rate swap spreads|last=|first=|date=|website=|archive-url=|archive-date=|access-date=}}</ref><ref>{{Cite web|url=https://www.treasury.gov/connect/blog/Pages/Examining-Swap-Spreads-and-the-Implications-for-Funding-the-Government.aspx|title=Examining Swap Spreads and the Implications for Funding the Government|website=www.treasury.gov|language=en-us|access-date=2017-03-27}}</ref>