QUICK DEFINITION
Swap Spread is the difference between a swap rate and the yield on a government bond of similar maturity.
WHY IT MATTERS
Why Swap Spread matters in bond markets
Swap spreads reflect interactions among sovereign supply, bank balance sheets, derivatives demand, collateral and funding conditions.
MARKET CONTEXT
How to think about it
Bond investors use swap spread as part of a wider framework that links prices, yields, cash flows, liquidity and risk. The concept should therefore be read together with its related terms rather than as an isolated definition.
Is Swap Spread important for fixed-income investors?
← Back to the Bond Market Glossary Yes. Swap spreads reflect interactions among sovereign supply, bank balance sheets, derivatives demand, collateral and funding conditions.