Mid Swap Curve: What does swap rate mean on the curve?
I am trying to understand what a swap rate means on the curve. Example a bond of 7 years says 7 percent interest, does this mean the cost of swapping a floating rate to a fixed rate is 7 percent?
What is that 7 percent implying? And why are bonds priced as MS+xbps?
I don't understand the logic of bringing in swaps in bond pricing, is some interest being swapped or MS curve is just a benchmark to show rates across different maturities?
Swap rates represent in a certain way investors' expectations regarding the yield curve. Therefore, they might be useful when pricing some instruments.
a swap rate is an interest rate. a bond trades in terms of its price....and every price can be calculated into an equivalent yield price --> yield yield --> price these calcs are interchangable
swap rates are theoretically interest rates that banks use to lend to one another banks tend to be a better credit risk than the avg borrower...so spreading to the swap curve is a way of pricing credit risk
Thank you. Can you help me interpret any point on the swap curve?
Example: 7 percent for 7 year. What does this 7 percent mean?
If we price over Treasury that's risk less and then add bond's risk over it. But what about the same in swap curve?
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