hard · Debt Capital Markets pricing-yields-curve

Assuming the curve is upward-sloping and the bond's credit is unchanged, which statement about the relationship between the two spreads — and the reason — is correct?

1. The ASW spread exceeds the Z-spread, because the par-par structure pays the full 6% coupon stream against par-100 funding while the investor finances the above-par premium, concentrating the credit pickup over a smaller effective principal.
2. The Z-spread exceeds the ASW spread, because the Z-spread discounts every cash flow at the higher long-end zero rates whereas the ASW spread is a single short-rate quantity that ignores curve shape.
3. The two spreads are identical by construction, since both are defined as the constant margin over the same swap curve that reprices the bond to its market price of 108.
4. The ASW spread is lower than the Z-spread, because paying away an 8-point premium at inception reduces the net coupon the asset-swap buyer can pass through to the floating leg.

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