Pure Yield Pickup Swap

Pure Yield Pickup Swap

A transaction in which bonds with lower yields are swapped for bonds with higher yields.

Notes:

Pure yield pickup swaps are usually a risky investment strategy. Investors using this strategy expose themselves to higher interest rate risk since higher yielding bonds will have a longer term to maturity. In addition, high yielding bonds are usually of lower credit quality, thereby exposing the investor to higher default risk.

See also: Bond Swap, Credit Rating, Default Risk, Swap, Yield

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Pure yield pickup swap

Moving to higher yield-bonds.