Pure Yield Pickup Swap

Definition of 'Pure Yield Pickup Swap'


A transaction in which bonds with lower returns are swapped for bonds with higher returns. With a pure yield pickup swap the sole purpose of the transaction is to increase yield, the new bonds will have a similar maturity and risk rating as the old bonds; only the coupon will differ.

Investopedia explains 'Pure Yield Pickup Swap'


Bonds earn yields for investors in three primary ways: coupon interest, capital gains and coupon reinvestment. Investors can use different types of bond swaps to take advantage of these different types of yields to try to improve their returns. Other examples of bond swaps include a rate anticipation swap, which is carried out with the goal of earning a better return from an expected change in market interest rates; a substitution swap, which exchanges two bonds that are similar in every way except price; and intermarket spread swaps, which seek to profit from yield mismatches between bonds in different sectors, such as government bonds and corporate bonds.


Filed Under: , ,

comments powered by Disqus
Hot Definitions
  1. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  2. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  3. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  4. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
  5. Organic Growth

    The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.
  6. Family Limited Partnership - FLP

    A type of partnership designed to centralize family business or investment accounts. FLPs pool together a family's assets into one single family-owned business partnership that family members own shares of. FLPs are frequently used as an estate tax minimization strategy, as shares in the FLP can be transferred between generations, at lower taxation rates than would be applied to the partnership's holdings.
Trading Center