A forward swap rate that is implied from the market forward swap rate and a “forward” bond yield to maturity (YTM) or forward spot rate. It is generally perceived as a measure of the risk premium (and that of all relevant costs) that is incorporated in a swap on top of the risk-free benchmark rate.

The implied forward swap rate is constructed from the same yield curve used to compile the forward swap spread. Therefore, in order to come up with the implied swap rate spread, the yield curve has to be transformed from its yield based setting to a swap rate setting.