The 30-year swap spread fell as low as 0.5 basis point (bps) today. That means that the fixed side of a long-term interest-rate swap was trading at no premium vs. Treasury bonds. None. Remember that any interest-rate swap has to have a bank or other financial institution standing in the middle.
With everyone scared to death about counter-party risk, it's absolutely shocking that long-term swaps can trade at no premium over Treasuries. By comparison, 2-year swaps have a spread of 104bps, and traded as high as 165bps earlier this month.
This strange anomaly is just another example of what happens when leveraged investors are desperate to unload bad trades into a highly illiquid market. Over the last two years, there were many "range notes" sold that referenced the yield differential between 10-year and 30-year swaps. Now that trade isn't looking so hot, and people want to hedge. Lots of people rushing to leave the building, but a small door of liquidity, and a spread of zero is the result. .