What is a Bond Swap?

Bond swaps, also known as "bond swaps," are proactive swaps of bonds by predicting the yield of a bond or bond portfolio during a horizontal analysis period, and thus a group of bond assets.

Bond swap

1. The total nominal bond holdings are unchanged. The two parties do not need to perform actual bond swaps, and the total amount and type of bonds they hold in name will not change. However, the total amount and type of bonds held in nominal terms is the basis for swaps.

2.The nature of different bond swaps is

Alternative swap

Substitution swaps are swaps of one bond with another ideal substitute bond that is very similar to it, in order to gain a temporary price advantage. This price advantage may be caused by the relatively unbalanced supply and demand conditions of money in the market.

Intra-market spread swap

When there is a certain yield difference between the two bonds in the market, and the difference may change, then the asset manager will perform internal market price swaps and sell one bond and buy another This kind of bond is expected to obtain a higher holding period yield.

Interest rate swap

Interest rate swap is to directly use the expected change in the interest rate of the entire market to obtain profits. For example, under the condition that the overall yield is expected to increase, managers will replace long-term bonds with corresponding amounts of short-term bonds. This is because long-term bonds have a certain increase in yield, and because of their longer duration, their price declines will generally be larger than short-term bonds. Under the condition that the overall yield is expected to decrease, managers will replace short-term bonds with long-term bonds, because under the condition of lower yields, the price increase of the long-term bonds is generally larger than that of short-term bonds.

Pure yield swap

Pure yield swaps focus on long-term yield changes, and are unwilling to make any predictions about future yields or yield differentials in a short period of time. Replace those with low long-term yields by those with long-term yields Of bonds.