Swap spreads: why so tight?

16 Dec 2015

Swap spreads represent the inherent credit risk of dealing with prime banks for interest rate swaps. Recently swap spreads have been on a narrowing trend and have even gone into negative territory in the US, implying that dealing with a prime bank is safer than dealing with a sovereign. How can this be?  

In this article we examine the key factors contributing to the fall in swap spreads. We also look at the implications of this phenomenon for investors and market participants. 

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