Swap spreads... anyone out there good with swaps

Am stuck on concept of Swap Spreads (Reading 29, “Spread Analysis” - p. 77). How exactly do these work, & how are used to compare relative value across the universe of available securities? EOC problem #14 gives an example of a manager swapping out fixed- for floating-rate LIBOR. Here’s how I answered (haven’t checked the answer key): A. buys ABC bond ==> receives 720 bps (= 5YT + 120) pays fixed ==> 670 bps (= 5YT + 100) receives floating ==> 570 bps realized spread to 1st reset ==> 5YT + 120 - 5YT - 100 + LIBOR = LIBOR + 20 bps B. Swaps out his exposure of ABC bond relative to 5YT, for exposure of ABC bond relative to LIBOR. However, it hasn’t sunk in what this would tell us, in terms of relative value (have the feeling I didn’t get the math right).

(p.s. I realize this is likely only a couple points on the exam, if they even bother to test it)

What is your q?

How do you use a swap spread to determine the relative value of a bond? Conceptual question.