For swaps with maturities of less than five years, the swap spread is driven by rates in the Eurodollar CD futures market, but for swaps with maturities greater than five years, the spread is determined primarily by the credit spreads in the corporate bond market.

Question

Quizplus · Accepted Answer

This statement is true. Swap spreads for short-term maturities are more closely correlated with the rates in the Eurodollar CD futures market, while long-term swap spreads are more closely tied to the credit risk in the corporate bond market.

For Swaps with Maturities of Less Than Five Years, the Swap