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How Semi-Bond and Monthly Money Swap Rates Differ

Article Quant Q&A · Author: Preston Lui
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Summary

The document explains that the two quoted swap rates represent different contract conventions, so they apply to different floating-rate exposures. A semi-bond swap pays fixed interest every six months using a 30/360 day-count basis and receives three-month LIBOR quarterly on an Actual/360 basis.

A monthly money swap instead pays and receives monthly, with both legs using Actual/360. Its floating leg references one-month LIBOR, and the described contract has no amortization. The answer notes that this convention is commonly used by real estate and corporate borrowers hedging one-month LIBOR debt. It offers contract definitions rather than market data or a method for comparing current rate levels; the quoted rates therefore should not be treated as interchangeable without accounting for payment frequency, index tenor, and day-count basis.

Key ideas

  • Semi-bond swaps pay fixed semi-annually on a 30/360 basis and receive quarterly three-month LIBOR on Actual/360.
  • Monthly money swaps exchange monthly payments on an Actual/360 basis.
  • The monthly money floating leg references one-month LIBOR and the described contract does not amortize.
  • Monthly money conventions are used to hedge floating-rate debt tied to one-month LIBOR.

Tags

Fixed incomeDerivatives pricingUS markets
Full text
# What is the difference in the two swap rate as seen in this link?


# What is the difference in the two swap rate as seen in this link?












https://www.chathamfinancial.com/technology/us-market-rates

there are two swap rate, Swaps – Semi-bond and Swaps – Monthly Money. What is the difference between the two rate?

## Answer by Paul Brennan (score 1)

https://quant.stackexchange.com/a/60107

### Semi-Bond

These are based on an OTC swap contract in which a party pays the fixed rate semi-annually on a 30/360 basis, versus receiving 3-month LIBOR quarterly on an Actual/360 basis.

### Monthly Money

Monthly money swap rates are commonly used by real estate and corporate borrowers to hedge exposure to floating-rate 1-month LIBOR debt. The contractual basis is paying a fixed rate monthly on an Actual/360 basis, versus receiving 1-month LIBOR monthly on an Actual/360 basis, without amortization.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

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