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- Title
Understanding the term structure of swap spreads.
- Authors
Cortes, Fabio
- Abstract
Market expectations about the future path of interest rates can be derived from both government bond and swap yield curves. But at times these curves may provide imprecise signals about interest rate expectations. Understanding what factors can affect the term structure of swap spreads — the difference between government bond rates and swap rates at different maturities — may therefore be helpful to policymakers when interpreting market views of future interest rate developments. This article reviews past developments in dollar, euro, sterling and yen government bond and swap markets and considers the potential influences on the term structure of swap spreads. Using statistical analysis, it finds that some influences seem to be common across international markets, but others, such as liquidity or preferred habitat issues, tend to be specific to certain markets.
- Subjects
SWAPS (Finance); SPREAD (Finance); GOVERNMENT securities; BOND market; DERIVATIVE securities; SECURITIES trading
- Publication
Bank of England Quarterly Bulletin, 2006, Vol 46, Issue 1, p45
- ISSN
0005-5166
- Publication type
Article