Crucially, however, a swap spread of 17 basis points was unusually low: between May 1994 and February 1997 the 20-year US. dollar swap spread had fluctuated between 17 and 33 basis points (Perold 1999, p. A20). If the spread widened again, LTCM's bond position would be worth more than its swap position, and it could profit perhaps substantially by selling the bonds and entering into a swap contract "canceling out" the original.

Donald MacKenzie, An Engine, Not a Camera, loc. 1301