Workout Period
Time to work out. And one! And two! And three! Those temporary yield discrepancies aren’t going to work out themselves!
The workout period is a time when temporary yield discrepancies between fixed income securities are fixed to correct any market inefficiencies. Over time, the spread gets...worked out. Or narrowed.
Let’s break this down so you can, um...work it out.
There’s a fixed income market that sells bonds to investors. Over time, the yields on similar bonds might get skewed, resulting in very different yields for issues of similar risk and duration. This is a problem, since those similar bonds should be giving out similar yields at the same time in the marketplace. The workout period, then, is the market working to correct these inefficiencies. Working out those kinks. Fifty Shades of Bonds, or something like that.
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