In the U.K, it is used to refer to a bond swap. It is a trade that involves the sale of one bond and the use of the proceeds to purchase a different bond in order to establish a view on interest rates, credit spreads or the shape of the yield curve, etc. Investors can embark on bond swapping to take advantage of current market, tax conditions, or better meet their current investment objectives or adjust to a change in their investment status.

Bond swap should not be confused with a derivative swap that inherently doesn’t involve the purchase or sale of real bonds. Fixed-income securities make excellent candidates for swapping, thanks to the availability of securities with similar features in terms of maturity, price, credit quality, and coupon.