Coupons and principal, the price–yield seesaw, YTM, duration, credit spreads, the yield curve, clean vs. dirty price, and convertible bonds.
For: learners who want to understand bonds, interest rates and fixed-income investing
Buying a bond = lending money to a government or company in exchange for regular interest and your principal back at maturity.
When market interest rates rise, older bonds fall in price. Use a seesaw to see the most important rule in bonds.
Buy at today's price and hold to maturity: what's your annual return really? YTM counts both the coupons and the price difference.
For the same 1% rise in rates, a 10-year bond falls far more than a 1-year bond. Duration measures exactly this sensitivity.
A company might not pay you back. The higher the risk, the higher the yield investors demand, and that extra is the credit spread.
Connect the yields of Treasuries at different maturities into a line: normal and upward-sloping, flat, or inverted? It's often seen as a barometer for the economy.
Why do you pay extra when you buy a bond between coupon dates? Understand accrued interest and you can tell the quoted clean price from the dirty price you actually pay.
A bond you can swap for stock: when the stock is weak, the bond floor holds it up; when the stock soars, it rises with it. Drag the stock price and watch it switch between "bond" and "stock".