Dollar swap spreads traded in a comparatively tight range this week. Ten year spreads traded down to 116bp over the 6.50% February 2010 Treasury on the lows, and up to 122bp on the highs. They closed the week dealing near the highs at 121.5bp over Treasuries. Five year spreads were at about 89bp over the 5.875% November 2004 Treasury. Dealers continue to complain about the paucity of volume in the inter-bank swaps market. Wall Street is still too worried about volatility to make active markets, and most customers have been sidelined by the wild oscillations. On the face of it, it is a good time to lock in floating rate as the curve is very flat and the Fed is likely to raise rates at least 25bp next month. The ECI data released yesterday (Thursday) makes it more likely the Fed will raise rates 50bp in May. But only a minority of customers have taken advantage of the conditions.
April 28, 2000
