View source for Finance:Swap spread

'''Swap spreads''' are the difference between the [[Finance:Swap rate|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).<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 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 [[Finance:Basis point|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>

Often, [[Finance:Fixed income|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 [[Finance:Credit spread (bond)|credit spread]] in Europe during the 1990s.

==References==
{{Reflist}}

[[Category:Financial markets]]
[[Category:Swaps (finance)]]
[[Category:Credit risk]]



{{Sourceattribution|Swap spread}}