Swap Spread

(1) The negotiated interest rate differential reflecting supply and demand and counterparty credit ratings which is added to or subtracted from the (fixed) swap rate. (2) The interest rate differential between the swap rate and the comparable government borrowing rate in the applicable currency. Adding (1) and (2) will give the spread between the rate on a specific swap and the comparable maturity default-free rate. The total swap spread will usually be expressed as a market maker's spread (bid/asked) over a specific United States Treasury rate.

Glossary * S