You’re right that the PIMCO statement doesn’t say when the swaps were entered into. But you can assume these are rolling contracts and just look at the one with the furthest out maturity date and assume that is closest to the March 31st rate. In this case, the November maturity contract at 0.59% interest rate.comeinvest wrote: ↑Wed Aug 31, 2022 6:16 pmIf this is the position statement per 03/31/2022, then it says nothing about the time when the swaps contracts were entered. The rates that you see are the prevailing rates at that time, not the rates on 03/31/2022. In the statement itself, you can read "3-month USD-LIBOR plus a specified spread". USD-LIBOR is typically a spread of 0.x% (varying) above the corresponding T-bill rates. The swaps incur a spread on top of that LIBOR, which already has a spread above T-bills. Box spreads can be sold by individual investors for ca. 0.4% above T-bill rates.CletusCaddy wrote: ↑Wed Aug 31, 2022 4:59 pmPSLDX borrowing cost from five months ago, roughly 0.6%-0.7%:DMoogle wrote: ↑Wed Aug 31, 2022 3:49 pmI wouldn't be so sure if financed via box spreads. It's probably not that far off.CletusCaddy wrote: ↑Wed Aug 31, 2022 3:42 pmThe difference is PIMCO almost certainly has a lower borrowing cost than you do.
That said, box spreads aren't for everybody.
...
Box trade implied interest rate for similar duration loan from five months ago, 2.0%:
...
I believe that their implicit financing rates of their 3-months swaps is very similar to the implicit financing rates of futures or options. I think this was also conjectured and largely confirmed for leveraged ETFs in the HFEA thread in this forum. Due to no-arbitrage arguments, it would be hard to believe that any derivative financing rates with similar collateral differ measurably.
And we don’t have to guess at the Box spreads cost, we can look at the observed data, which shows 2.0%
None of this has anything to do with arbitrage. We’re comparing a rate accessible to a retail investor to a rate accessible to an institutional investor. What would be surprising is if the latter couldn’t access rates lower than the former.
The name of the game here is institutional relationships and preferred pricing.