The "swap spread" is the difference between the fixed interest rate at which swaps can be entered into and the yield of a government bond with a similar maturity denominated in the same currency. Swap spreads can indicate arbitrage opportunities because the party to a swap who is paying a floating rate of interest while receiving a fixed rate is in a situation similar to that of someone who has borrowed money at a floating rate and used it to buy a bond that pays fixed interest. If there is enough of a discrepancy between the terms on which swap contracts can be entered into and on which positions in bonds in the same currency and of similar maturities can be financed, arbitrage may be possible.

Donald MacKenzie, An Engine, Not a Camera, loc. 980