US SWAPS-2-year spread tightest since Aug 2007

NEW YORK Thu Jan 8, 2009 9:00am EST

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NEW YORK Jan 8 (Reuters) - The spread on U.S. two-year interest rate swaps contracted on Thursday to their tightest level since August 2007, amid falling interbank lending costs and improving risk appetite.

The yield premium on two-year swap over Treasuries was last quoted at 58.75 basis points, compared with 62.75 basis points late Wednesday.

Two-year swap spread, which narrows with increased investor confidence, hit a record wide above 160 basis points in early October at the height of the credit crisis. (Reporting by Richard Leong; Editing by Theodore d'Afflisio)

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