Consider that borrowing 10 year money at the 6-month LIBOR rate is equivalent to borrowing at LIBOR for 6 months and rolling the debt 19 times.<p>The swap market provides a linkage between the money market ( borrowing &lt; 1 year) and the capital market (borrowing &gt; 1 year), and allows one to borrow (or lend) where the comparative advantage is better.<p>The 10 year swap rate is then a market number which represents the relative demand (and supply) within the money &amp; capital markets.