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<p>A swap spread is the difference between the fixed component of a given swap and the yield on a government security, usually from the U.S. Treasury, with the same maturity. Swaps are derivative contracts to exchange fixed interest payments for floating rate payments. Since a Treasury bond (T-bond) is often used as a benchmark and its rate is considered risk-free, the swap spread on a given contract is determined by the perceived risk of the parties engaging in the swap. As perceived risk increases, so does the swap spread. For this reason, swap spreads can be used to assess the …</p>
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