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. Substitution Swap

    An exchange that is carried out by trading a fixed-income security ...
  3. Intermarket Sector Spread

    The difference in yields between two fixed-income securities ...
  4. Intermarket Spread Swap

    A swap transaction meant to capitalize on a yield discrepancy ...
  5. Bond Swap

    Selling one debt instrument in order to use the proceeds to purchase ...
  6. Fixed-Income Security

    An investment that provides a return in the form of fixed periodic ...
Related Articles
  1. Mutual Funds & ETFs

    A Top-Down Approach To Investing

    Use a global view to determine which stocks belong in your portfolio.
  2. Bonds & Fixed Income

    The Impact Of An Inverted Yield Curve

    Find out what happens when short-term interest rates exceed long-term rates.
  3. Bonds & Fixed Income

    Why Bad Bonds Get Good Ratings

    Credit ratings are not the only tool to rely on when assessing bonds. Find out why they sometimes fall short.
  4. Options & Futures

    Bond Spreads: A Leading Indicator For Forex

    Here we examine some telling patterns in the relation between countries' interest rates and their currency pairs.
  5. Bonds & Fixed Income

    Bond Yield Curve Holds Predictive Powers

    This measure can shed light on future economic activity, inflation levels and interest rates.
  6. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  7. Bonds & Fixed Income

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
  8. Mutual Funds & ETFs

    Top 3 Muni California Mutual Funds

    Discover analyses of the top three California municipal bond mutual funds, and learn about their characteristics, historical performance and suitability.
  9. Investing Basics

    What Does Plain Vanilla Mean?

    Plain vanilla is a term used in investing to describe the most basic types of financial instruments.
  10. Mutual Funds & ETFs

    Top 4 Investment Grade Corporate Bonds ETFs

    Discover detailed analysis and information about some of the top exchange-traded funds (ETFs) that offer exposure to the investment-grade corporate bond market.
  1. Are high yield bonds a good investment?

    Bonds are rated according to their risk of default by independent credit rating agencies such as Moody's, Standard & ... Read Full Answer >>
  2. What are the maximum Social Security disability benefits?

    The maximum Social Security disability benefit amount for a single eligible person in 2015 is $1,165 per month, but you can ... Read Full Answer >>
  3. What is the relationship between the current yield and risk?

    The general relationship between current yield and risk is that they increase in correlation to one another. A higher current ... Read Full Answer >>
  4. What is a 'busted' convertible bond?

    In finance, a convertible bond represents a hybrid security that offers debt and equity features and risks. While a convertible ... Read Full Answer >>
  5. Who or what is backing municipal bonds?

    Municipal bonds are backed by dedicated taxes or revenue sources related to specific projects, or by the full faith and credit ... Read Full Answer >>
  6. What are the differences between debt and equity markets?

    The basic differences between the debt and equity markets include the type of financial interest they represent, the way ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!