Relationships Gilts vs Swap Spreads

CDO2 · July 20th, 2005, 2:52 pm

Hi there,Does anyone know how to change (convert) price from Gilt over spreads to Libor +spreads (bps)?Many Thanks

kipi001 · July 20th, 2005, 8:17 pm

the Gilt is the England government Bond : Your bond have a maturity , coupons per year and a price! you must be able to calculate the par yield of your bond! suppose you got 4 per cent.If the Libor12months, for example is 3.5 per cent, then you can convert your price to Libor12m + 50 bps....Regards,Kipi.

CDO2 · July 21st, 2005, 1:35 pm

thanks for your email.I am still not clear how convert price from spread over gilt to spread over libor - could please email me a sample answer e.g. suppose we have 65 gilt over spread at 3/11/97 what would be the equivalent price in spread over libor?regards

yes · July 21st, 2005, 2:58 pm

Well very very roughly for 1 corporate bond, interest rate swap, gilt of same maturity:(spread over gilt) = yield(corporate)-yield(gilt) and (spread over Libor) = yield(corporate) - swap rateso to switch from one to another you need (swap rate - yield(gilt))If I unterstood your question correctly.Y