discussed below, the swap spreads key determinant for swaps with tenors (i.e., maturities) of five years or less is the cost of hedging in the Eurodollar CD futures mar- ket.4Although listed contracts exist with delivery dates out to 10 years, the liquidity of the Eurodollar CD futures market diminishes considerably after about five years. For longer tenor swaps, the swap spread is largely driven by credit spreads in the corporate bond market.5 Specifically, longer-dated swaps are priced relative to rates paid by investment-grade credits in traditional fixed- and floating-rate markets. Given that a swap is a package of futures/forward contracts, the shorter-term swap spreads respond directly to fluctuations in Eurodollar CD futures prices. As noted, there is a liquid market for Eurodollar CD futures contracts with maturities every three months for approximately five years. A market participant can create a synthetic fixed-rate security or a fixed-rate funding vehicle by taking a position in a bundle of Euro- dollar CD futures contracts (i.e., a position in every 3-month Eurodollar CD futures contract up to the desired maturity date).     4Naturally, this presupposes the reference rate used for the floating-rate cash flows is LIBOR. Furthermore, part of swap spread is attributable simply to the fact that LIBOR for a given maturity is higher than the rate on a comparable-maturity U.S. Treasury. 5The default risk component of a swap spread will be smaller than for a comparable bond credit spread. The reasons are straightforward. First, since only net interest payments are exchanged rather than both principal and coupon interest payments, the total cash flow at risk is lower. Second, the probability of default depends jointly on the probability of the counterparty defaulting and whether or not the swap has a positive value. See John C. Hull, Introduction to Futures and Options Markets, Third Edition (Upper Saddle River, NJ: Prentice Hall, 1998).         For example, consider a financial institution that has fixed-rate assets and floating-rate liabilities. Both the assets and liabilities have a maturity of three years. The interest rate on the liabilities resets every three months based on 3-month LIBOR. This financial institution can hedge this mis- matched asset/liability position by buying a 3-year bundle of Eurodollar CD futures contracts. By doing so, the financial institution is receiving LIBOR over the 3-year period and paying a fixed dollar amount (i.e., the futures price). The financial institution is now hedged because the assets are fixed rate and the bundle of long Eurodollar CD futures synthetically creates a