Swap execution spreads: how to check a bank's quote against mid

Last updated: 9 October 2026

Short answer: the execution spread is the gap between the mid-market swap rate and a bank's quoted fixed rate. It covers credit, funding, capital and hedging costs, plus margin. To check it, price the same swap at mid at the same moment, subtract, and multiply by the PV01. On a 5-year $50m SOFR swap, each 1bp is worth about $22,000.

On evaluation calls the question comes in a few forms. "How do I read bid, mid and ask, and what is a normal spread over mid?" Project finance teams ask how to benchmark an adviser's or a bank's quote against mid. Lenders ask how far off a benchmark can be before it distorts the comparison. And borrowers sizing a hedge want to know what a few basis points actually cost. For the short, practical version of the check, see how to check a bank's swap quote.

What are bid, mid and ask on an interest rate swap?

The bid is the fixed rate a dealer will pay, the ask (or offer) is the fixed rate it will receive, and the mid is halfway between. For a borrower paying fixed, the bank's quote sits above mid; for a client receiving fixed, it sits below.

In the interdealer market the bid and ask on a liquid swap are close together, so the mid is a tight, observable number: the rate at which a swap has zero value on day one. A client quote is different. The bank shows a single all-in fixed rate that starts from mid and adds a charge for dealing with that client on that structure. That gap is what people call the execution spread, the credit spread, or simply the bank's spread.

"It's a bid, mid, ask. So when you have a mid, if you're going to a bid, it will probably be the subtraction of the spread. And if you go to ask, it'll be the addition of the spread…"

What is the spread over mid made of?

The spread over mid pays for the bank's cost of holding your swap for its whole life, plus its margin. The main parts are counterparty credit (CVA), funding (FVA), regulatory capital, any initial margin it must post, the cost of hedging the trade, and profit.

Each part has a driver you can name:

1. Credit (CVA). The bank is exposed to you if rates move in your favour and you default. Weaker credit, longer tenor and larger notional all raise this charge.
2. Collateral. A swap under a two-way credit support annex (CSA) is cheaper to carry. Many project finance and corporate swaps are uncollateralised and secured alongside the loan instead.
3. Funding (FVA). Without collateral, the bank funds any positive value on the swap itself, at its own cost of funds.
4. Capital and initial margin. Uncleared swaps carry capital charges, and the bank may post initial margin on its own hedge.
5. Structure and execution. Amortising, sculpted or forward-starting notionals are harder to hedge exactly than a bullet swap, and very large tickets take more effort to lay off.
6. Margin and competition. What is left is the bank's profit, and it depends on whether other banks are quoting.

A Bank of England staff working paper, "OTC premia" (Cenedese, Ranaldo and Vasios, Staff Working Paper No. 751, 2018) used trade repository data to show this in practice: clients pay a higher fixed rate on swaps that are not centrally cleared, the premium falls when the client posts initial margin or has stronger credit, and it is absent between dealers, which the authors read as dealer bargaining power.

What is a normal execution spread over mid?

There is no published standard for what a bank charges over mid on a client swap. The spread depends on your credit, tenor, notional, amortisation, collateral terms, market conditions and how many banks are competing, so the only meaningful comparison is your quote against mid at the same moment.

We are deliberately not quoting a "typical" range. We have not found a regulator or central bank publication that gives one for client swaps, and informal ranges mix very different deals: a collateralised 2-year bullet swap for a highly rated corporate is not the same product as an uncollateralised 18-year amortising swap for a project company. Think about it in relative terms:

• Longer tenor, larger charge. Credit and funding exposure grow with the life of the swap.
• Uncollateralised costs more, and stronger credit costs less, as the Bank of England paper above found.
• Competition narrows it. The margin part is the most negotiable, and competition between banks is the main thing that moves it.

In the US, swap dealer rules (17 CFR 23.431) require dealers to disclose a swap's material characteristics, including its price, before trading with counterparties that are not themselves swap dealers or major swap participants, and to provide a daily mark on uncleared swaps that are not margined daily. Some trades, such as anonymous trades on a swap execution facility, are exempt. Disclosure is not the same as a competitive price; an independent mid is what tests that.

How do I measure the spread on a bank's quote?

Price the identical swap at mid at the same timestamp as the quote, then subtract mid from the bank's fixed rate. The result, in basis points, is the spread. Every difference in timing or conventions that you leave in will show up as false spread.

1. Record the quote time. Swap rates move during the day, often by several basis points in a session and by more on a data release or central bank day. A mid taken an hour away from the quote can be off by more than the spread you are measuring.
2. Match the conventions. Fixed leg frequency, day count, start date, payment dates and business day rules must match the bank's term sheet. A semi-annual versus annual fixed leg alone moves the rate by about 3bp at a 3.5% rate and 4 to 5bp at 4 to 4.5%.
3. Match the notional profile. An amortising or sculpted swap has a different mid from a bullet swap of the same final maturity. Use the actual schedule.
4. Strip out the loan margin. The all-in cost of a hedged loan is swap rate plus loan margin. Only the swap rate is compared with mid.
5. Check for embedded options. A floor on the swap, matching a floor on the loan, has value and will widen the apparent spread.
6. Subtract. Bank fixed rate minus mid, in basis points.

Our post on why swap rates differ between sources covers the timing and convention mismatches in more detail, and swap rate calculation in project finance walks through amortising profiles.

How do I turn a spread in basis points into money?

Multiply the spread by the swap's PV01, the change in its value for a 1bp move in the fixed rate. That gives the present value you pay over the life of the swap. For a rough annual figure, multiply the spread by the notional outstanding.

Here is a worked example. It prices a spot-starting 5-year SOFR swap on a $50m bullet notional, annual fixed and floating legs, Actual/360, which is the market-standard SOFR convention. Priced at the 30 September 2026 close, the PV01 was $22,056 per basis point. We then priced the same swap at fixed rates of 5bp, 10bp and 20bp above mid and read the mark-to-market each time.

The day-one mark-to-market is negative by exactly the spread times the PV01, which is why a swap traded above mid shows a loss on its first valuation: the execution cost, booked up front. A benchmark that sits 3bp away from the true mid would be worth about $66,000 on this swap, so a benchmark a few basis points off hides most of a modest spread.

The same arithmetic works for a shorter or partial hedge. Take a hypothetical 4-year swap hedging 95% of a $50m loan, so a $47.5m notional. Priced at the 30 September 2026 close, its PV01 was about $17,157, so every 10bp of spread is worth about $172,000 in present value terms.

For an amortising swap, use the PV01 of the actual schedule: it is lower than the bullet figure, so the same spread costs less in money.

What should I ask my bank for when it quotes a swap?

Ask for what you need to reproduce the mid yourself: the mid rate and its timestamp, the conventions, the notional schedule, and whether the quote is all-in or mid plus a stated spread.

• The mid rate at the time of the quote, and the exact timestamp (with time zone)
• All-in rate or mid plus spread? If it is quoted as a spread, ask what the spread covers (credit, funding, execution)
• Conventions: fixed and floating leg frequencies, day counts, calendars, business day convention, payment lag
• Dates: trade date, effective date, first and last payment dates, and any stub periods
• Notional schedule used, matching your loan's amortisation
• Collateral terms: is the swap under a CSA, or secured alongside the loan?
• Embedded features: any floor, break clause or mandatory early termination
• Validity: how long the quote stands, and how the rate will be set if execution is later

How do competitive quotes and hedging advisers fit in?

Competition and independent checks narrow the margin part of the spread, which is the part that is negotiable. Asking two or more banks to quote the same swap at the same time gives a market price; an independent mid tells you how far that market price sits from fair value.

In practice teams combine several approaches:

• Simultaneous quotes. Several banks price the identical swap at the same moment and the best rate wins. It works best when the structure and conventions are set in advance.
• Agreed spread, executed against mid. On some financings, particularly project finance, the hedging banks are also lenders and the credit charge is agreed in advance. On execution day, the rate is set at an observed mid plus that agreed spread, so checking the mid at that moment becomes the key control.
• A hedging adviser. An independent adviser can structure the hedge, run the competition and check the execution rate against mid on the day. It is reasonable to ask which mid they used and at what time, as you would a bank.
• Your own independent mid. Pricing the swap yourself at the moment of the quote turns the spread from a number you are told into one you can check.

How to check this yourself

1. Take the bank's term sheet and note the quoted fixed rate and the exact time it was given.
2. Rebuild the swap: index, start and maturity dates, both leg frequencies and day counts, and the notional schedule.
3. Price it at mid on an independent curve for that same timestamp.
4. Subtract mid from the quoted rate to get the spread in basis points.
5. Read the PV01 from the same pricing and multiply it by the spread to get the cost in money.
6. If the spread looks large, check conventions, timing and embedded floors before concluding it is margin.
7. Keep the mid, timestamp and curve source on file. It is the evidence for your board, your auditor or the next negotiation.

Where BlueGamma fits

• The swap pricer returns the mid swap rate, PV01 and cashflows for your exact schedule, including amortising and sculpted notionals.
• You can pass a valuation time and get the curve as at that moment, so the mid lines up with the time of the bank's quote; every point is timestamped in UTC.
• BlueGamma curves are typically within 1bp of bank mids once conventions align. We show mid only, with no bid or offer, because the spread depends on your relationship with the bank.
• How each curve is built (instruments, interpolation, day counts, calendars) is set out in our methodology, which auditors can cite.
• The same numbers are available in the web app, the Excel add-in and the API. For the step-by-step version of the check, see check a bank's swap quote.

We are independent: we don't advise, broker or trade swaps.

Start a free 14-day trial or book a call to price your next quote against mid.

Frequently Asked Questions

What is the spread between mid and a bank's swap quote?

It is the difference between the mid-market swap rate and the fixed rate the bank offers you, and it pays for the bank's credit, funding, capital and hedging costs plus its margin. For a borrower paying fixed, the quote sits above mid. Measure it by pricing the identical swap at mid at the same moment and subtracting. See how to check a bank's swap quote.

What is a normal execution spread on an interest rate swap?

There is no published standard, because the spread depends on your credit, the tenor, the notional, amortisation, collateral terms and competition between banks. A Bank of England staff working paper found clients pay more on uncleared swaps and less when they post initial margin or have stronger credit. The reliable test is your quote against mid at the same timestamp.

How do I convert a swap spread in basis points into a dollar cost?

Multiply the spread by the swap's PV01, its change in value for a 1bp move. On a 5-year $50m SOFR swap with a PV01 of about $22,000 (priced at the 30 September 2026 close), a 10bp spread is worth about $220,000 in present value, or roughly $50,000 a year in extra interest. For an amortising swap, use the PV01 of the actual schedule.

Why does my new swap show a negative mark-to-market on day one?

Because it was traded above mid, and the valuation is done at mid. The day-one loss equals the spread times the PV01, so it is the execution cost recognised up front rather than a market move. Our post on swap rate calculation in project finance explains how the rate is built.

What should I ask my bank for when it quotes a swap?

Ask for the mid rate and its timestamp, whether the quote is all-in or mid plus a stated spread, the full conventions, the notional schedule, the collateral terms and any embedded floor. With those you can reproduce the mid and see the spread yourself.

Why does my independent mid not match the bank's mid?

Usually because of timing or conventions, not the data. A mid taken at a different time, or with a semi-annual instead of an annual fixed leg, can differ by several basis points. Our post on why swap rates differ between sources covers the common causes.

Does BlueGamma show bid and offer swap rates?

No, BlueGamma shows mid only, because bid and offer depend on each client's relationship with its bank. The swap pricer returns the mid rate and PV01 for your exact schedule at a chosen valuation time, typically within 1bp of bank mids once conventions align, so you can measure the spread on any quote.