The talented youngster has made 11 Premier League appearances for the Swans after Neil Taylor's season-ending ankle injury and is anticipating a bright future with the club.
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“I’m delighted to have signed a new deal here,” Davies said. “It shows the faith the club has in me and I’ve been rewarded for my performances so far.
“It is more security for me, and that will allow me to keep working as hard as possible to continue my development here.
“I have already learned a lot from not only playing, but by working hard in training with the manager, coaching staff and team-mates and taking as much advice as possible from them.
“It’s a great time to be at Swansea City – whether you are a player or supporter – and I’m delighted to be a part of it.”
The left-back made his debut coming off the bench against West Ham earlier this season and has since received a call-up to the Wales national squad from manager Chris Coleman.