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.

  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Intermarket Spread Swap

    A swap transaction meant to capitalize on a yield discrepancy ...
  3. Intermarket Sector Spread

    The difference in yields between two fixed-income securities ...
  4. Arbitrage

    The simultaneous purchase and sale of an asset in order to profit ...
  5. Yield

    The income return on an investment. This refers to the interest ...
  6. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic ...
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