One of the odder distortions created by post-crisis financialregulation—the unprecedented decline in U.S. swap rates belowTreasury yields—may be poised to end.

Swap rates, what companies pay to exchange fixed interestpayments for floating ones, are on track to rise back aboveTreasury yields across all maturities for the first time since2014. The swap spread, as the gap between the two is known, turnednegative in 2008 at the long end for the first time ever. It wasthe start of a shift that traders view as anomalous because ittheoretically indicates that the market views the credit of banksas stronger than that of the U.S. government.

Now several forces are at work that are restoring therelationship to what it was in the decades before the financialcrisis—including the prospect that Republicans' tax overhaul planscould reduce corporate issuance, stemming the typical post-sale useof swaps. There's also speculation that regulatory relief is aheadfor banks, making it more attractive for them to holdTreasuries.

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