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billyx524
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Posts: 45
Joined: February 12th, 2016, 4:48 pm

CMS Spread

August 2nd, 2019, 2:00 am

Hi,

I have a question about the term "CMS Spread", can someone please clarify what exactly does it mean?

When people say the spread between two CMS rates (e.e. 10 year CMS rate minus 2 year CMS rate), is the so called "10 year CMS rate" and "2 year CMS rate" actually referring to the 10 year par swap rate and 2 year par swap rate?

And why is it said that the spread contains information on the slope of the yield curve?

Many Thanks!
 
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bearish
Posts: 5697
Joined: February 3rd, 2011, 2:19 pm

Re: CMS Spread

August 2nd, 2019, 9:17 pm

Yes, CMS is an acronym for constant maturity swap. The term "slope of the yield curve" means slightly different things to different people, but is often represented by the difference between 10's and 2's, whether swap or government rates.  
 
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billyx524
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Posts: 45
Joined: February 12th, 2016, 4:48 pm

Re: CMS Spread

August 2nd, 2019, 10:13 pm

Is there a reason why it is called a CMS spread, instead of something like just swap rate spread?
 
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bearish
Posts: 5697
Joined: February 3rd, 2011, 2:19 pm

Re: CMS Spread

August 3rd, 2019, 1:20 am

You may want to consult a slang forum, rather than Wilmott.
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