Swap spread

Interest Rate Swaps are typically compared to Treasury securities of comparable maturity in order to calculate the "swap spread."  Specifically, the swap spread equals the swap rate of the fixed leg minus the Treasury rate for comparable maturities.  For example, if the current market rate for a 5-year swap is 1.35 percent and the current yield on the 5-year Treasury note is 1.33 percent, the 5-year swap spread would be 2 basis points.

Often, fixed income 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.