How Cross-Currency Swap Basis Quotes Differ from FX-Implied Rates
Summary
The document explains why Bloomberg’s FXFA and SWPM screens can show different rates and basis figures for a EUR/USD cross-currency swap. FXFA uses floating EUR and USD yields, while the example SWPM setup uses two fixed rates, so the coupon rates are not directly comparable. To view a standard market quote, the answer recommends a floating-for-floating cross-currency swap template, including a mark-to-market variant.
The distinction is in how the basis is obtained: FXFA can infer a USD rate from foreign-exchange quotes using covered interest rate parity, with basis measured relative to a risk-free rate. In SWPM, the basis is directly represented by the market quote for the selected swap structure. The answer points to a Bloomberg ticker and the XCCY screen as places to inspect quotes. It does not derive the example’s stated pip spread, and the comparison depends on using matching conventions and swap structures.
Key ideas
- FXFA and SWPM may use different rate structures, so their displayed rates need not match.
- A fixed-for-fixed swap setup is not directly comparable to FXFA’s floating-rate yields.
- FXFA can infer a rate from FX quotes using covered interest rate parity.
- In SWPM, the basis is the market quote for the selected cross-currency swap structure.
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Full text
# How does Bloomberg compute the cross currency swap basis? # How does Bloomberg compute the cross currency swap basis? First, look at the FXFA for EURUSD The EUR and USD Yield & FX swap rate on 10/18/2023 are given as: The computations are shown in this answer. ........................................................................ The second screenshot is The original question was: 1 - I would like to ask why coupon rates are different from the FXFA screenshot (EUR and USD Yields)? 2 - Where is the cross currency swap basis? Is the premium the cross currency swap basis? ........................................................................ The amended question looks at the following screenshot from SWPM, which is a EURUSD Cross Currency Swap (1 years) 10/20/2023-10/20/2024 1-How does one calculate the cross currency swap basis SPREAD (-21.311 pips)? 2- Is this the basis spread formula? @AKdemy ## Answer by AKdemy (score 3, accepted) https://quant.stackexchange.com/a/77028 Your second screenshot is not a standard XCCY swap because you look at two fixed rates. You cannot expect that to match the FXFA screen in any case because FXFA uses two floating rates, USD yield and EUR yield. What rates you use in FXFA will be visible when you click on either rates column. To get a market quote for a cross currency swap, you need to load a float float cross currency swap like the template I linked in the comment for your previous question. It's the old logic of using 3m Libor /Euribor rates instead of SOFR/ESTR but the logic is the same. Generally, as mentioned in the previous answer, you will not get identical results when comparing FXFA to SWPM. If you imply the USD rate in FXFA you use FX OTC quotes and back out an implied rate from covered interest rate parity. The basis is the difference to the risk free rate in this case. In the SWPM case, you look at market quoted swaps and the basis is the quote itself. E.g. for the standard template you get by using `SWPM -FLFL -MTM` you have the underlying ticker `EUXOQQ5 BGN Curncy`. You can also look at quotes on `XCCY`. Right hand side below is the market quote. LHS is the SWPM template.
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