How to Describe a 5s10s Swap Spread Box Trade

Summary

The document addresses how to name a position combining a 5s10s interest-rate swap curve trade with a Treasury curve hedge. The described position pays the 5-year swap and receives the 10-year swap, while buying 5-year Treasuries and selling 10-year Treasuries. In asset-swap spread terms, this is characterized as selling the 5s10s box, or receiving the box.

The answer cautions that there is no universally official term for describing the asset-swap spread direction, so calling it a steepening or flattening can be ambiguous. For the swap leg, the respondent recommends describing the trade as receiving 5s10s; for the combined spread expression, “selling the box” or “receiving the box” is clearer. This is a concise market-convention explanation rather than a formal definition, and desk usage may vary.

Key ideas

• The position pays the 5-year swap and receives the 10-year swap.
• The Treasury hedge buys 5-year notes and sells 10-year notes.
• The combined asset-swap spread position is described as selling or receiving the 5s10s box.
• Terms such as steepening and flattening can be ambiguous for the box.
• There is no official naming convention, so describe each leg or the box directly.

Tags

# Nomenclature for Swap Spreads


# Nomenclature for Swap Spreads












If one is flattening 5s10s swap curve ( Paying 5y swap / Receiving 10y swap) and then hedges by steepening 5s10s Tsy curve ( Buying 5s / Selling 10s) which is equivalent to Buying 5y spreads and selling 10 spreads i.e selling 5s10s spread curve - is this called Steepening the 5s10s spread curve or flattening it?

## Answer by Attack68 (score 4, accepted)

https://quant.stackexchange.com/a/81246

I wouldn't say "flattening" (for the ASW box), but if someone else did this is what I would assume - selling the box. But it's not a good assumption as there is not an official term. When referring to 5s10s swaps, I would say "receiving 5s10s" for your trade, for the ASW side I would say "selling the 5s10s box" or "receiving the box". In the interdealer market to achieve this I would say "5s10s box -4.0 offer"

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