The process of swapping bonds of different classes or riskiness to take advantage of lucrative discrepancies in yield. For example, if the difference between yields on AAA and AA bonds is scant, an investor may swap lower-quality bonds for higher-quality bonds to add more safety to his investments at a small sacrifice in yield.

But if that difference widens to a profitable extent, the investor would be better off swapping back to lower quality (higher-risk), higher-yielding bonds.