Loans, priced by the market.
Bonds are IOUs with fixed coupons and a return of face value at maturity. What moves is the price the market pays for those promises — and it's driven by yields, duration, the shape of the curve and credit risk. Play with each one below.
Anatomy of a bond
Face, coupon, maturity, YTM — and why the price rarely equals face.
A bond promises fixed coupons and returns face value at maturity. What changes is what the market will pay for that promise — that price moves opposite to yields.
Coupon < YTM → discount ($ price below face).
Coupon = YTM → par ($ price ≈ face).
Price vs Yield
Yields go up, prices go down — but not in a straight line. Meet convexity.
Notice the curve is convex — a fall in yield lifts price more than the same rise in yield hurts. That asymmetry is called convexity.
Duration & rate risk
How much you lose per 1% move in rates — the single most useful bond number.
Duration is the bond's sensitivity to rates. A 10-year bond with 8-yr duration loses roughly 8% for each 1% (100 bps) rise in yield. Long, low-coupon bonds hurt the most.
The yield curve
Short vs long-term yields. Normal, flat, inverted, steep — each tells a story.
Longer bonds pay more — the market expects steady growth.
Credit spreads
What extra yield you get for lending to a company vs a government — and what it costs you in defaults.
Corporate bond yield = Treasury yield + credit spread. The spread compensates you for default risk, illiquidity and volatility — anything left after expected loss is your reward.
Bond ladders
A simple portfolio structure that gives you steady income and reinvestment options every year.
A ladder spreads maturities so one rung matures every year. If rates rise, you reinvest at higher yields; if rates fall, only the maturing rung reprices. It smooths interest-rate risk without picking a duration.