Pickup

A gain in yield made by selling one bond and buying another. When market interest rates change, bond yields change. If the new interest rates are higher than the old rates, investors can achieve a better yield, or pickup, by selling their old bonds and buying new ones that have the same level of risk. However, if interest rates are steady, or declining, the only way to achieve a pickup is to buy existing, higher interest-rate bonds at a premium or to buy higher-risk bonds that carry a higher yield. Thus, a pickup strategy may entail cost or risk.

Also referred to as "yield pickup."

Pickup is the most common reason why investors trade bonds. Other reasons include an anticipated credit upgrade for a bond issuer (particularly if the upgrade will move the bond from junk to investment grade), a credit-defense trade to limit a portfolio's exposure to default risk and a sector-rotation trade to benefit from anticipated outperformance in a particular industry or sector. Investors also use yield curve adjustment trades to change the duration of a bond portfolio based on expectations about the direction of interest rates. When they anticipate rising interest rates, they will want to shorten the duration of their portfolios; when they anticipate declining interest rates, they will want to lengthen the duration of their portfolios.


Investment dictionary. . 2012.

Look at other dictionaries:

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  • pickup — [pik′up΄] n. 1. the act of picking up, as in fielding a rapidly rolling baseball 2. the process or power of increasing in speed; acceleration ☆ 3. a small, open truck with low sides, for hauling light loads: in full pickup truck 4. Informal a) a… …   English World dictionary

  • Pickup — Pick up, or Pick up Pick up , n. [Colloq., Cant, or Slang] 1. Act of picking up, as, in various games, the fielding or hitting of a ball just after it strikes the ground. [Webster 1913 Suppl.] 2. That which picks up; specif.: (Elec.) same as… …   The Collaborative International Dictionary of English

  • pickup — ► NOUN 1) (also pickup truck) a small van or truck with low sides. 2) an act of picking up or collecting a person or goods. 3) an improvement. 4) a device on an electric guitar which converts sound vibrations into electrical signals for… …   English terms dictionary

  • Pickup-56 — was released on 10 May 2006 and is an album by Swedish dansband Lasse StefanzTrack listing#När countryn kom till Skåne #Bring it on Home to Me #Mot en horisont #När inte himlen är så blå #Pauline #Har du glömt #Kärleken är blind #En timme försent …   Wikipedia

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  • pickup — (n.) also pick up, small truck used for light loads, 1932, from PICK (Cf. pick) (v.) + UP (Cf. up), the notion probably being for use to pick up (feed, lumber, etc.) and deliver it where it was needed. As an adjective meaning temporary, ad hoc… …   Etymology dictionary

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