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Swap Rate Divergence from Fixed Rate Pricing, Is it the time to consider doing a 10 year Swap

The 10 year Swap rate vs. the 10 year fixed mortgages banks are offering for commercial properties have increased to .73%, roughly 3/4% better

for swaps as of today June 30th, 2014. This begs the question should borrowers actively pursue this opportunity giving the possibility interest rates

may increase going forward. In general, bank rates have been increasing since November , 2013 because of the perception that the cost of borrowing

funds banks need to borrow to lend out. At the same time , since the beginning of 2014, short term money rates have falling , causing swap rates to

fall. Swap rates are generally based on short term rates. Because swap rates and bank rates are going in separate directions, i.e. divergence, this

presents borrower a substantial benefit to lock in a 10 year rate that is 3/4% of a point below what banks are offering.  We as a firm can guide you this

decision and whether you call us or not, swaps are very complex , and you should consult with your advisors whether this works for you.

Edward Voccola, LLM     617-233-5555


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