The Swap Market Says Treasury And AI Debt Is Not A Problem
Monday’s Tweet of the Day in the Daily Commentary highlighted rising swap spreads and noted that Treasury issuance is not the problem many pundits make it out to be. Swap spreads are a great gauge for the health and liquidity of the US Treasury market, so it's worth appreciating the Tweet below. A swap spread is the fixed rate on an interest rate swap minus the Treasury yield of the same maturity. As the graph shows, swap spreads have been negative for years, currently sitting around negative 39 basis points. At first glance, that doesn't make sense since swaps have bank counterparty risk and…
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