Ten-Year U.S. Swap Spreads Collapse After Coordinated Rate Cuts (Liz Capo McCormick)

  Oct. 8 (Bloomberg) -- The spread between the rate on 10-year interest-rate swaps and Treasury yields collapsed to the least since before credit markets began to seize last year after coordinated central bank rate cuts.

  The spread narrowed to as low as 44.94 basis points, the smallest since Feb. 6, 2007. The differences, or gaps, between swap rates of most maturities over corresponding Treasury yields are down today. The 10-year swap spread was 52.25 basis points at 3:06 p.m. A basis point is 0.01 percentage point.

  ``The movement in the 10-year swap spread is signaling a break in the upward trend in credit spreads,'' said Tony Crescenzi, chief bond market strategist at Miller Tabak & Co. in New York. The movement ``is probably hinting at a drop in the two-year swap spread, which if it occurs would strongly signal an easing of pressures in the inter-bank market.''

  Two-year swap spreads are often used as a gauge of credit concern and near-term expectations for the London interbank offered rate, or Libor. The two-year swap spread is down almost 1 basis points to 133 basis points. It reached 167.25 basis points on Oct. 2, the widest since Bloomberg began compiling the data in 1988.

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