30-Year Swap Spread Will Normalize Soon
Currently at negative 10.
We are near a negative convexity hedging event as the current FN coupon nears 5% (last 4.95).
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June 8th, 2009 at 7:25 pm
How big?
June 8th, 2009 at 8:42 pm
Current coupon now 5.02 and 30-year swap at 8.50. How big? North of $100 billion, mostly in the long end.
June 8th, 2009 at 9:42 pm
30-year swap spreads average about +0.5% over the short existence of this market.
June 8th, 2009 at 9:44 pm
Thx David. It won’t normalize to 50 bp anytime soon, I meant going back to positive.
June 10th, 2009 at 4:56 am
sorry, I knew you meant positive — I put the 50 bp out for reference sake. Sorry for the confusion.