Asset Swap Spread (ASW)
Corporate Credit Analysis glossary · Corporate Credit Analysis
Definition
The spread to LIBOR (or the replacement swap reference rate) realized by swapping a fixed-coupon bond's cash flows into floating; a common credit-spread measure for floating-rate funded investors.
Asset Swap Spread (ASW) in plain English
Some bonds pay a fixed interest amount every year (a 'fixed coupon'), but many big investors think in terms of a floating rate that moves with market interest rates. An asset swap lets an investor trade the bond's fixed payments for floating ones, and the asset swap spread is the extra yield they earn above that floating benchmark rate. In plain terms, it's a clean way to answer 'how much am I getting paid for taking this company's credit risk?' once you strip out the effect of interest-rate moves. It's popular because it lets floating-rate investors compare a fixed-rate bond apples-to-apples with their world.
Also called: ASW
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