A swap whose maturity matches that of another instrument. This arises when an investor tries to synthetically hedge a bond/ note/ treasury security, etc. A matched maturity swap may be established to match the maturity of an on-the-run 5-year treasury note. Typically, a matched-maturity swap will have the same characteristics of a respective instrument in terms of coupon, duration, and convexity. For example, a matched maturity swap for a government agency bond that matures in November 15, 2030 may be a spot-starting swap that matures on the same date, with a given par swap rate set as a spread to the then-current 30-year Treasury yield. In general, a widening (narrowing) of agency spreads over the period will indicate even greater decline (increase) in swap spreads. As such, the yield-yield asset swap spread (matched maturity asset swap spread) experiences a large move.
This swap is also referred to as a yield-yield swap.
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