Tension palpable in the credit markets
What the heck is a swap spread? Why does it matter? I could try to write up a completely new explanation. But how about I just refer you to a 2002 Federal Reserve paper on swaps and swap spreads (PDF link) instead? It's entitled "Counterparty Credit Risk in Interest Rate Swaps during Times of Market Stress" and was authored by Antulio N. Bomfim. Suffice it to say that widening swap spreads are yet another indicator that credit stress and fear is running high in today's market.