Negative swap spreads and limited arbitrage urban j jermann ∗ wharton school of the university of pennsylvania and nber july 11, 2018 abstract since october 2008 ﬁxed rates for interest rate swaps with a thirty year maturity. “ samantha looked at the swap spread and decided that the heightened risk that came with such an investment was not worth it given her meager portfolio ” was this helpful yes no 11 people found this helpful.
Swap spreads turn negative, implications swap spreads approximate the difference between the yields on us treasuries and the interest rates on dollar swap contracts which are commonly misconstrued as a gauge or proxy for the borrowing costs of top us banks.
The spread is the differential between that swap and a nominal 2-year treasury note the 2-year swap spread tightened to less than 6 basis points on wednesday, marking the lowest-ever recorded level on a closing basis, according to richard gilhooly, us director of interest-rate strategy at td securities.
These days, swap spreads are near or below zero across maturities measured in basis points the shift is a result of a confluence of events, says aaron kohli, an interest-rate strategist in new. 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.