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 United States Treasury securities, also called Treasuries or Treasurys, are government debt instruments issued by the United States Department of the Treasury to finance government spending as an alternative to taxation. Since 2012, U.S. go ...

in the case of the United States). 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. Often,

fixed income Fixed income refers to any type of investment under which the borrower or issuer is obliged to make payments of a fixed amount on a fixed schedule. For example, the borrower may have to pay interest at a fixed rate once a year and repay the pri ...

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

Financial markets Swaps (finance) Credit risk {{finance-stub