Yield Pickup

The yield pickup is the difference between the yield on a new bond and the yield on an existing bond. It is a measure of the additional return that an investor can earn by buying the new bond instead of the existing bond.

The yield pickup is calculated by subtracting the yield on the existing bond from the yield on the new bond. For example, if the yield on the existing bond is 5% and the yield on the new bond is 6%, the yield pickup is 1%.

The yield pickup is an important factor to consider when making an investment decision. An investor should only buy a new bond if the yield pickup is greater than the cost of the transaction. The cost of the transaction includes the commissions and fees that are charged by the broker.

The yield pickup is also affected by the credit quality of the bonds. A bond with a higher credit rating will have a lower yield than a bond with a lower credit rating. This is because investors are willing to accept a lower yield on a bond that is less likely to default.

The yield pickup is a useful tool for investors who are looking for high-yield investments. However, it is important to remember that the yield pickup is not the only factor to consider when making an investment decision. Other factors, such as the credit quality of the bonds and the cost of the transaction, should also be considered.