The difference between the swap rate (also known as the par rate) and another market reference rate - for example the government bill rate - for fixed rate funds of the same maturity.
The size of the swap spread is driven by the size of general credit spreads and by the supply and demand for fixed rate funds.
The swap spread usually increases when interest rates are lower, as borrowers demand more fixed rate funds in an attempt to fix their borrowing costs, so driving up the price of fixed rate funds.
Swap spread can also refer to a market maker’s bid-offer spread for swaps of a given maturity. In other words the difference between the market maker’s buying and selling prices.