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I know that a swap (more specific an IRS) is an OTC product to exchange future payments base on a principal. In this case, the interest on the fixed leg will be computed trying to have a NPV of 0, so far so good.

Now, I have seen that there is another type of IRS that seems to be traded on regulated financial markets, for example the Euro 10 yr Swap that have EUSA10 as Bloomberg tickers.

I have seen that this ¿Instrument? have "no maturity" as it's price is traded since late 90' as seen here: https://markets.ft.com/data/indices/tearsheet/summary?s=A@?EURIRSXY:RCT

What is the Euro 10 yr Swap product?

Are there future cash flows with this product? (like the OTC swaps that I know)

What does the price of the Euro 10 yr Swap indicates?

Thank you in advance,

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  • Not all IRS are OTC. In the U.S. after Dodd-Frank, vanilla IRS are required to be cleared.
    – user68318
    Commented Jul 28, 2023 at 16:38

2 Answers 2

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What is the Euro 10 yr Swap product? Are there future cash flows with this product?

You understand swaps correctly. In this case the swap would entail exchanging fixed interest payments for floating interest payments over the next 10 years based on some underlying rate - historically EURIBOR, now EONIA, eventually €STR (ESTR).

What does the price of the Euro 10 yr Swap indicates?

The quote you're seeing is historical quotes for a 10-year swap that originated on that day. It is effectively the market's view on the average interest rate over the next 10 years.

Also note that swaps are still OTC - Bloomberg is just assigning a ticker so it can publish a quote.

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  • Thank you for your answer, What I still don't understand is the meaning of the price, you said that the value shown in the page is the interest rate, but in the page the value have euro as unit. and If NPV = 0, why this value in euros is ≠ 0. Another question, when a Market Maker receives an IRS RFQ what does it contain? - the underlying variable interest rate, a fix interest rate chosen by the client and the MM responds with price in order to have a NPV =0 or - the underlying variable interest rate so the MM has to give a quote with an interest rate in order to have a NPV =0
    – david.t_92
    Commented Oct 30, 2019 at 18:36
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    It may say EUR but it is an interest rate. A swap quote will tell you the fixed interest rate that will make the NPV of the swap zero.
    – D Stanley
    Commented Oct 30, 2019 at 18:41
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When the question was asked, it seems FT used Bloomberg data for the link. It is now using Refinitiv.

€STR is an OIS swap, which stands for overnight index swap. RFR (risk free rate) is the current acronym ISDA, central banks and regulators use for the indices in IBOR transition.

EUSA10 is the ticker for a 6m Euribor swap, which still trade frequently and Euribor is not scheduled to be discountinued (see for example the recommendations by the working group on euro risk-free rates). It is a fixed to float interest rate swap that has 6m Euribor as the reference index.

Below is a screenshot of the DES page of the ticker EUSA10 and the associated swap pricer SWPM. enter image description here

As you can see, the NPV of both legs matches, making the swap zero cost at initiation. The market quote at the top is a generic quote (BGN) that Bloomberg computes from all available quotes that Bloomberg currently receives. This generic is the basis for the SWPM screen (unless you select a different market maker as your choice within the market data section).

The OIS discounting is unrelated to the swap legs, which are fixed vs 6m Euribor. It is standard to have so called dual curve stripping, meaning standard swap cash flows are discounted using OIS rates (now €STR for EUR).

Edit

In my example above, accrual start is 02/03/2023 (the effective date) and the first period ends in 08/03/2023 which is the pay date. The rate is set on 02/01/2023 (which is the latest index). The next period is from 08/03/2023 until 02/05/2024 with pay date on 02/05/2024, and reset on 08/01/2023. That is because reset is in advance for these swaps (SOFR or ESTR swaps would be in Arrears) and the number of days before accrual are by default 2.

enter image description here

The swap curve is used prior to observing the actual reset values. On the dates itself, the fixing is observed and the actual cashflow is determined.

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  • Thanks a lot for your answer, Just a question when after closing a swap, on which day the rate to be used for the next payment is determined. Using this example a cashflow will be paid each 6 month (lets supose January 31th and July 31th) For the july 31th the rate to be used will be the one in janyary 31th?
    – david.t_92
    Commented Mar 10, 2023 at 12:43
  • Related to this, the field Latest Index on the floating leg indicates the rate to be used for the first payment? Thanks in advance :D
    – david.t_92
    Commented Mar 10, 2023 at 12:44

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