Matched-Maturity Asset Swap Spreads and Futures Carry

Summary

This note explains one interpretation of a futures contract’s matched-maturity asset swap spread. The proposed trade pairs the futures position with a forward-starting interest rate swap beginning on the contract’s first delivery date and ending when the cheapest-to-deliver bond matures. Under this interpretation, the spread compares the forward swap rate with the forward yield of that bond.

The explanation connects the matched-maturity spread to carry analysis: comparing the current spot asset swap spread with the futures-related spread can represent the spread component of carry over the delivery period. The note is a short answer to a conceptual question and offers no worked calculation or supporting market data. It does not fully explain the distinction between matched-maturity and par-par asset swaps, nor establish that this construction covers every market convention; readers should verify instrument definitions and delivery assumptions before applying it.

Key ideas

• A matched-maturity asset swap pairs a futures exposure with a forward-starting swap tied to the delivery date.
• The proposed swap ends on the maturity date of the cheapest-to-deliver bond.
• The spread compares the forward swap rate with the forward yield of the delivery bond.
• Asset swap carry can be framed as the change between spot and futures-related spreads.

Tags

# carry and roll of an asset swap


# carry and roll of an asset swap












I came across many interesting questions regarding carry and roll of swaps, bond futures and bonds. Now I found that link about the carry / roll of an asset swap. Reading that article two questions popped up:

- Now to the asset swap example. I have a bit of trouble of understanding the usage of the ASW data of the German Bund curve: "However, as the future asset swap (asw) is quoted with matched maturities, we only really need a run of the German spot asset swap curve" Why is that the case and why is it important that it is matched maturity and not par-par?

- The following abstract is not at all clear to me: "The future’s matched-maturity asw represents the CTD asw out of the delivery date, so the 3-month carry is the spread between the CTD spot asw and the OEH8 asw. With our numbers." What is meant by future's matched maturity ASW and is it the same as the OEH8? How is the asset swap of the BOBL futures contract defined? Is OEH8 ASW and future's matched ASW the same?

## Answer by user42108 (score 0)

https://quant.stackexchange.com/a/72109

"What is meant by future's matched maturity ASW...?"

My understanding is as follow: trade the future vs. a forward starting swap with the swap start date on the first delivery date of the futures contract and the swap end date on the day the CTD bond matures. The matched maturity swap spread is the difference between the rate on the forward starting swap and the forward CTD yield.

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.