Workout Period

DEFINITION of 'Workout Period'

The period of time when temporary yield discrepancies between fixed income securities are adjusted. A workout period can be viewed as a sort of reset period, in which bond issuers and credit rating agencies review outstanding fixed income issues and adjust any discrepancies in price/yield, in order to correct any inefficiencies in the market.

BREAKING DOWN 'Workout Period'

Investors typically take advantage of this period by participating in a bond or sector swap. For example, if an investor believes that the yield spread between two bonds is too wide, their investment would be moved from the higher yielding bond to the lower yielding bond. If the investor has guessed the expected workout period correctly, the investor will gain from the yield adjustment.