The fixed swap rate that is associated with a forward settlement. If the yield curve is upward sloping, this rate is higher than a spot delivery swap rate. If the curve is downward sloping, the forward swap rate is lower than a spot delivery swap rate. Theoretically, this rate can be determined by two relevant spot swap rates and two relevant zero rates. The following formula illustrates this:

For example, assume the 5 and 10 year spot-starting breakeven zero coupon rates are: S₅= 0.0265, S₁₀= 0.0275, respectively. By plugging in the figures, in order to calculate the theoretical 3-year rate, 5 years forward, we find:

S= [(1+ 0.0275)¹⁰ / (1+ 0265)⁵ ]^(1/5) – 1 = [1.3117 / 1.1397]^1/5 -1 = 0.0285 or 2.85%.