A bond trading strategy in which profits are made by changing yield spreads among different sectors of the bond market. For example, an investor may trade one type of a bond for another in an attempt to skim the yield difference between the two bonds. More specifically, a sector swap may involve the sale of a government bond and the use of the sale proceeds to buy corporate bonds. Similarly, it may involve the sale of a low-coupon bond and the purchase of a high-coupon bond.

Sectors of the bond market include, for example, public versus private, or an industrial sector versus another, etc.