The most common market practice is to name forward rates by, for instance, “2y5y”, which means “2-year into 5-year rate”. … The first number refers to the length of the forward period from today while the second number refers to the tenor or time-to-maturity of the underlying bond.

What are forward rates used for?

Forward rates are calculated from the spot rate and are adjusted for the cost of carry to determine the future interest rate that equates the total return of a longer-term investment with a strategy of rolling over a shorter-term investment.

What does two year spot rate mean?

The 2-year spot rate is the rate at which you discount the year 2 cashflows. If the bond has no coupon, has a two year maturity, and is fairly priced then the 2-year spot rate is the yield to maturity of the bond (or as you say ‘the rate you get’).