Yield Pickup

Yield Pickup

The extra yield an investor receives when he/she exchanges a bond with a lower yield (and usually a shorter maturity) for one with a higher yield (and usually a longer maturity). While this exchange sounds advantageous, it is risky because the yield pickup often comes from a bond with lower credit quality, and the longer maturity likewise exposes the investor to interest rate risk. However, the yield pickup is still a guaranteed higher return, and many investors take advantage of them. See also: Pure yield pickup swap.
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Onshore government bonds currently offer a significant yield pickup from dim sum bonds and the sovereign debt of other major economies.
Corporates, meantime, offer some yield pickup, although sub-investment grade and peripheral Europe looks extended.
We live in a very low interest rate environment and investors are still looking for a yield pickup," said Christian Lenk, a fixed income strategist at DZ Bank.
That said, foreign bond holdings of the region s local currency government bonds held steady in the final three months of 2013 given the region s solid economic outlook and the attractive yield pickup versus other markets.
Notice also that the client is earning 30 points more than the current AA rate, a yield pickup made possible by linking two parties whose assets have different returns.
This, combined with limited yield pickup at the longer end of the maturity spectrum for certain MMF-eligible asset classes, has steered mangers toward safe-haven U.