Estimating Five-Year Swap Rate Moves from Treasury Ticks

Summary

The document offers a rough rule of thumb for relating a one-tick move in the on-the-run five-year Treasury to a move in the five-year swap rate. It assumes swap spreads stay constant and estimates that when the Treasury price rises by one tick, the swap rate falls by about 0.7 basis points.

This is a narrowly scoped approximation, not a general pricing method. The question also asks about ten- and thirty-year maturities, but the answer supplies no estimates for them and gives no derivation or supporting data. The stated relationship depends on the constant-spread assumption, so actual swap rate moves may differ when swap spreads change.

Key ideas

• A one-tick rise in the five-year on-the-run Treasury is estimated to correspond to a 0.7-basis-point decline in the five-year swap rate.
• The estimate assumes the swap spread remains constant.
• The answer does not provide comparable rules of thumb for ten- or thirty-year swaps.

Tags

# Approximate 5y swap rate move in 1 tick move in 5y treasury


# Approximate 5y swap rate move in 1 tick move in 5y treasury












If CT5s (the current on the run 5y treasury) goes from 99-20 to 99-21 - what will be the approx rate move in the 5y swap rate. Just trying to ascertain rule of thumbs for 5y, 10y and 30y.

## Answer by user68819 (score 1, accepted)

https://quant.stackexchange.com/a/78827

You'd be assuming swap spreads are constant, but a 1tick change in the 5y otr, is approximately -0.7bps on the swap

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.