Swap Spread
Swap spread is the difference between the fixed rate of a plain-vanilla interest rate swap and the yield on a government bond of the same maturity. It is typically quoted in basis points and reflects funding costs, credit risk, and liquidity in the swap market.
Example: For a five-year tenor, the fixed rate on a swap is 2.75% and the five-year Treasury yield is 2.10%, yielding a swap spread of 65 basis points.
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