Key facts
- Issuers are weighing a shift from swap locks to costlier Treasury locks.
- Swings in swap spreads are impacting hedging decisions for upcoming bond issuances.
Volatility in dollar swap spreads is causing US corporations to re-evaluate their hedging instruments for interest rate risk on upcoming bond issuances. Many companies have relied on swap locks, which are forward-starting, pay-fixed interest rate swaps, to hedge before issuing debt. However, recent swings in these spreads are leading treasurers to question whether swaps still accurately reflect the Treasury yields upon which their debt is priced, potentially leading them to consider more expensive Treasury locks.
