Skip to content
Subscriber Only

U.S. Rate Swap Spreads May Widen as Demand for Treasuries Rises

Regulatory changes and an end to temporary deposit insurance on some bank accounts are likely to boost demand for short-term Treasuries and widen the difference between swap rates and Treasury yields from record lows, according to Bank of America Corp.

The difference between the two-year swap rate and the comparable-maturity Treasury note yield, known as the swap spread, touched eight basis points, or 0.08 percentage point, on Oct. 17, the lowest since at least 1988, or as far back as Bloomberg tracks data. The gap is likely to widen to about 17 basis points, Bank of America predicted, from 11.5 basis points yesterday. The 2012 high was 49 basis points on Jan. 3.