LIBOR over Govt bond yield

meghanjackson

in schweser it says that --
Supply/demand of swaps by particpants willing to enter into a swap --- AGREED
It is not affected by technical mkt factors that can affect govt bond ---Can anyone explain this?

Thanks,
Varun Darji

busterbluth

Yields on government bonds might be distorted if they are trading in the repo market.

iteracom

Foreigners also buy because of tax advantage where they may prefer some bonds over others...also in repo market, may be a 10-yr bond is hot causing its yield to reflect untrue, non-market returns. Swaps are a "fair" game.