Swap spread: Difference between revisions

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Revision as of 06:18, 9 December 2015

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{{Unreferenced|date=December 2015}}

In finance, '''swap spread''' is a popular way to indicate the [[credit spread (bond)|credit spreadspreads]]s 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]] [[United States Treasury security|treasury]] with the same maturity as the swap. For example, if the fixed-rate of a 5five-year fixed-for-float [[LIBOR]] swap is 7.26% and the 5five-year Treasury is yielding at 6.43%, the swap spread is 7.26% -− 6.43% = 83 [[basis point|bps]].

Often, fixed income prices will be quoted in "SWAPS +", wherein the swap rate is added to a given number of basis points. The swap rate herethere is simply the yield on an equal -maturity Treasury plus the swap spread.

In finance, '''swap spread''' is a popular way to indicate the [[credit spread (bond)|credit spread]]s 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]] [[United States Treasury security|treasury]] with the same maturity as the swap. For example, if the fixed-rate of a 5-year fixed-for-float [[LIBOR]] 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]].

Often, fixed income prices will be quoted in "SWAPS +", wherein the swap rate is added to a given number of basis points. The swap rate here is simply the yield on an equal maturity Treasury plus the swap spread.

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

==References==

{{Reflist}}

[[Category:Financial markets]]