POPA ReconSwap spread wideners, particularly at the front end of the yield curve, have become markedly more attractive in recent months, the Dallas…
Swap spread wideners, particularly at the front end of the yield curve, have become markedly more attractive in recent months, the Dallas Fed noted, with expected returns relative to risk approaching levels seen in a traditional long basis trade. In a swap spread widener, an investor buys cash Treasuries, finances them in the repo market, and enters an interest rate swap in which it pays a fixed rate and receives a floating one. The trade benefits when swap rates rise relative to Treasury yields, which happens when banking regulations are eased, for instance, and balance-sheet constraints b…
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