Fixed income Beginner to advanced
Bonds and Interest Rates: The Market That Prices Everything Else
The bond market is larger than the stock market and sets the discount rate every other asset is valued against. These guides explain yields, duration, the curve, Treasuries, corporate credit and municipal bonds without assuming you have met any of them before.
The bond market is larger than the stock market and it sets the rate every other asset is discounted against. This section explains how a bond pays you, why its price falls when yields rise, what the shape of the yield curve says about expectations, and how Treasuries reach investors through auctions. It also covers duration, credit spreads and municipal bonds, the three places where bond investors are most often caught out.
It is written for everyone, starting from zero. You do not need to have met a coupon or a yield to maturity before. Readers usually arrive for one of two reasons: they want income they can count on, or they noticed that their stock portfolio moves whenever the ten year yield moves and want to know why. Both routes go through the same first three guides.
The pillar sets up face value, coupon, maturity and the price and yield seesaw with numbers you can check yourself. The yields guide then separates current yield, yield to maturity and yield to call, because a quoted yield can mean any of them. The curve guide reads the 2s10s and 3m10y spreads. Treasuries covers bills, notes, bonds and TIPS and how an auction works, duration measures what you lose when rates move, and the last two guides handle corporate and municipal credit.
This is the section the others depend on. The discount rate inside a stock valuation comes from here. The Fed sets the front end of the curve, which the economy section covers in detail. Bond ETFs behave like the bonds inside them at a roughly constant maturity, so duration matters more than the ticker. Portfolio construction uses bonds as the ballast that makes a large stock allocation holdable through a bad year.
How Bonds Work: Coupons, Prices and Why Yields Move Opposite
The payments written into a bond never change. The price changes every day. Almost everything confusing about the bond market falls out of that one arrangement, worked through here in dollars.
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- intermediate
Bond Yields Explained: Current Yield, YTM and Yield to Call
One bond can carry four yields at once, all of them arithmetically correct, and the one a seller shows you is rarely the one you should be planning on. Here is how each is built.
- intermediate
The Yield Curve Explained: Normal, Flat, Inverted and What Each Means
One line plots the price of time. Its slope has preceded every US recession since the late 1960s, and the lag has run anywhere from six months to two years, which is a warning and not a date.
- intermediate
Duration Explained: How Much a Bond Falls When Rates Rise
Multiply modified duration by the change in yield and you have your loss to within a fraction of a percent. Here is where that number came from, what it is quietly assuming, and where it stops working.
- intermediate
Corporate Bonds and Credit Spreads: Investment Grade to Junk
A corporate bond is a Treasury plus a bet on a company paying you back. The spread is the price of that bet, it moves faster than any rating agency, and the document behind it says more than the letter does.
- intermediate
Municipal Bonds Explained: Tax-Free Income and Its Fine Print
A 3.40% municipal yield is worth 5.00% to an investor in a 32% bracket and 3.86% to one in a 12% bracket. The same bond, bought on the same day, is two different investments.
- intermediate
TIPS Explained: Inflation-Protected Treasury Bonds
The coupon is the small half of what a TIPS pays you. The other half is added to the principal, taxed before it arrives, and handed over years later at maturity.
- intermediate
Bond Ladders: Building One and What It Solves
Five bonds, five maturity dates, one decision repeated every year. A ladder spreads the reinvestment question across time so that no single morning decides your income.
Bonds & Rates: common questions
Why do bond prices fall when interest rates rise?
A bond pays a fixed coupon. When new bonds are issued at a higher rate, the older one is worth less, so its price drops until its yield matches what a buyer could earn elsewhere for the same risk.
What does an inverted yield curve mean?
Short-term yields sit above long-term yields, which means the market expects rate cuts ahead, usually because growth is slowing. Inversion has preceded past U.S. recessions, with lags running from months to more than two years.
What is bond duration?
A measure of how sensitive a bond's price is to interest rates. A duration of 7 means the price falls roughly 7% if yields rise by one percentage point, and rises by about as much if yields fall by one point.
Are Treasury bonds risk free?
They carry no meaningful default risk, since the Treasury issues the dollars it repays. They still carry interest rate risk if you sell before maturity, and inflation risk, which is the problem TIPS are designed to address.
Should I buy individual bonds or a bond fund?
An individual bond matures, so you get face value back on a known date if the issuer pays. A fund holds a rolling set of maturities and never matures, which buys liquidity and diversification without a guaranteed return of principal.