NEW YORK, Reuters Spreads on U.S. interest rate swaps over Treasuries tightened or turned more negative on Monday as longterm investors hedged their exposure in the swaps market to position for lower interest rates in a sign of concern over the sharp selloff in stocks.

In late trading, the spreads were mixed.

U.S. swaps measure the cost of exchanging fixed rate cash flows for floating rate ones over a specific time frame.

A swap spread is expressed as the basispoint difference between the fixed rate of a swap tied to the Secured Overnight Financing Rate SOFR and the Treasury yield of the same maturity . That spread also takes into account the cost of financing a long or short position in Treasuries.

In general, a tighter spread means the cost of funding Treasuries is higher compared to swaps.

At the height of the meltdown earlier in the session, when stocks sold off sharply and U.S. Treasury yields dropped, swap spreads were tighter across the curve that could have been driven by hedging flows, analysts said.

The spread on 10year U.S. swaps over 10year Treasuries fell as much as 45.75 basis points bps on Monday, from 44.30 bps late on Friday. It settled at 44 bps as Treasury yields sharply came off their lows and for some maturities were even higher.

U.S. 20year swap spreads went as low as 78 bps and were last 76.75 bps, tighter or more negative on the day.

Very often what you39;ll see is that very large declines in equities lead to receiving needs in swaps,…