Serving the Quantitative Finance Community
affect of long term swap spread on lending
I came across an article on bloomberg. It stated that in asian growing economies, the 5 year swap rates have fallen below the 1 year swap rates indicating a forthcoming bank lending slump. I do not understand this relationship. If the 5 year swap rates are low, the cost of borrowing 5 year term loans should get cheaper. So how does this indicate a slump? Could you please clarify?thanksSam
-
- Martinghoul
- Posts: 188
- Joined:
affect of long term swap spread on lending
I guess the argument is that, if you believe that the swap rate is a general measure of the price of credit, a low rate implies low demand for loans.
Last edited by Martinghoul on August 7th, 2011, 10:00 pm, edited 1 time in total.