A
swap in which two
investors exchange two
bonds, one with a lower
yield and shorter
maturity and one with a higher yield and longer maturity. This is a high
risk transaction for the holder of the lower yield bond (that is, the one who receives the high yield bond). This is because the high yield bond is almost always of lower
credit quality and the longer maturity exposes the
bondholder to
interest rate risk. However, it does guarantee a higher
return that the bondholder would have received with the lower yield bond.