Finance:Swap spread
From HandWiki
Swap spreads are the difference between the swap rate (a fixed interest rate) and a corresponding government bond yield with the same maturity (Treasury securities in the case of the United States).[1] For example, if the current market rate for a five-year swap is 1.35 percent and the current yield on the five-year Treasury note is 1.33 percent, the five-year swap spread would be 0.02 percentage points, or 2 basis points.[2][3]
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 there 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
- ↑ "The term structure and interest rate dynamics Chapter 10". CFA Institute. https://www.cfainstitute.org/learning/products/publications/inv/Documents/fixed_income_chapter10.ppt.
- ↑ "an empirical analysis of interest rate swap spreads". http://faculty.mccombs.utexas.edu/keith.brown/Research/JFI-03.94.pdf.
- ↑ "Examining Swap Spreads and the Implications for Funding the Government" (in en-us). https://www.treasury.gov/connect/blog/Pages/Examining-Swap-Spreads-and-the-Implications-for-Funding-the-Government.aspx.
 |  |
