Treasuries’ negative swap spread may cause ‘significant pressure’


A “negative swap rate spread” could spell difficulty for the US Treasuries market as rates rise, research published by the New York Fed warned on February 6.

The spread stems from “long-maturity US Treasury bonds [trading] at a yield consistently above the interest rate swap rate of the same maturity”.

The authors of the study suggest this reflects an “inconvenience premium” for holding Treasuries – which sit on a dealer’s balance sheet – over swaps, which are off balance sheet. Post-global

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