A bond is a loan that can be traded. The issuer, whether a government, a company or a municipality, promises to pay interest and return principal on a schedule, and the market price of that promise changes every day. The most important relationship to learn is that bond prices and yields move in opposite directions: when market yields rise, existing bonds with lower coupons are worth less, and the reverse is true when yields fall.
How much a price moves for a given change in yield is described by duration, and convexity refines that estimate for larger moves. Longer maturities and lower coupons generally mean higher duration, which is why long-dated bonds are the most sensitive to rate changes. Yield to maturity, yield to call and yield to worst translate prices into comparable return figures, and credit ratings and spreads describe the extra compensation investors ask for taking default risk.
Interest rates themselves come from several places. The Federal Reserve sets a target range for the federal funds rate and steers short-term rates with tools such as the interest paid on reserves and open market operations. Longer-term yields, like the 10-year Treasury, are set by the market and reflect expected future short rates, expected inflation and a term premium. That is why the Fed can change its policy rate while long-term yields move differently, and why the shape of the yield curve is watched so closely.
Inflation connects it all. CPI, core CPI and the PCE price index measure price changes in different ways and with different weights, and the Fed’s preferred gauge is not the one most headlines quote. Inflation-protected securities and breakeven rates show how bond markets price future inflation, while mortgage rates, savings bonds and Treasury bills are the places where ordinary borrowers and savers meet these ideas.
The guides below are grouped by topic: bond basics, Treasuries and retail bonds, the Fed and policy rates, inflation, credit and structured products, and the money-market plumbing underneath. If you are new, begin with duration and the Treasury primer, then move to the Fed and yield-curve guides.
ECMSource publishes education and research, not personalised investment advice. See the financial information disclaimer.
Start here
Three explainers that anchor everything else on this page.
- Bond Duration & Convexity: Why Long Bonds Move Most — why price sensitivity rises with maturity, with worked examples
- T-Bills vs T-Notes vs T-Bonds: Treasury Securities 101 — the Treasury securities and how they differ
- Fed Funds vs. 10-Year Treasury: Why Long-Term Rates Diverge — why the policy rate and long-term yields can move apart
Bond mechanics and yield
Pricing, yield measures and the features that change a bond’s behaviour.
- Yield to Maturity Explained: YTM, YTC, and YTW — the three yield measures and when each applies
- Clean Price vs. Dirty Price: How Bond Accrued Interest Works — accrued interest and how bonds are quoted versus settled
- Zero-Coupon Bonds: How STRIPS Work, Pricing Math, and Taxes — pricing math and the tax treatment of zero-coupon bonds
- Callable Bonds Explained: Call Protection, YTC and Risks — call protection, yield to call and reinvestment risk
- Original Issue Discount (OID) Explained: Rules, Math, and Taxes — how discount bonds are taxed and accounted for
- Option-Adjusted Spread: How OAS Measures Bond Risk — measuring bond risk when an embedded option is present
- Term Premium Explained: Why Long Bonds Yield Extra — why investors demand extra yield for holding long maturities
- Bond Ladders Explained: How to Build a Treasury Ladder — building a ladder to manage reinvestment and rate risk
The yield curve
How the shape of the curve is described and what moves it.
- The 4 Yield Curve Shifts: Bull vs. Bear Steepeners & Flatteners — the four ways the curve can change shape
Treasuries and retail bonds
Buying and understanding government and tax-advantaged debt.
- TreasuryDirect vs. Brokerage: How Buying Treasuries Differs — how the two purchase routes differ
- Non-Competitive vs. Competitive Bidding in Treasury Auctions — how Treasury auction bidding works
- Treasury Floating Rate Notes: How Index Rates and Spreads Work — how index rates and spreads reset
- Series I Bonds Explained: Composite Rate, Inflation Math, Tax — how the composite rate and inflation adjustment work
- Series EE Savings Bonds: How the 20-Year Guarantee and Taxes Work — the guarantee period and the tax rules
- Municipal Bonds Explained: GO vs Revenue and the Tax Angle — general obligation versus revenue bonds and the tax angle
- Tax-Equivalent Yield: How to Compare Munis and Treasuries — comparing taxable and tax-free yields
The Fed and policy rates
How the Federal Reserve sets and transmits policy.
- How the Fed Sets Interest Rates — and Why It Moves Markets — the policy framework and why it moves markets
- How to Read FOMC Minutes: Fed Speak, Nuance, and Signals — reading policy statements and minutes for signals
- Fed Dot Plot Explained: How to Read the SEP — how to interpret the Summary of Economic Projections
- Fed Floor System: How IORB and ON RRP Set Interest Rates — how administered rates keep the policy rate in its range
- Open Market Operations: How the Fed and the Desk Steer Rates — how the Fed and its trading desk steer short-term rates
- QE vs QT: How the Fed Balance Sheet Actually Works — how the central bank balance sheet expands and shrinks
- Fed Discount Window Explained: Rates, Collateral, and Stigma — rates, collateral and the stigma attached
- Fed Funds Futures Explained: How Markets Price Rate Cuts — how markets price expected rate changes
- Primary Dealers Explained: How Wall Street Transmits Fed Policy — the dealers that transmit policy into markets
- Federal Reserve vs. U.S. Treasury: Key Differences Explained — who does what, and why the two are often confused
- What Is Jackson Hole? The Fed Retreat That Moves Markets — why the annual symposium draws attention
Inflation measures
The gauges the Fed and markets watch.
- CPI vs Core CPI vs PCE: How the Fed’s Inflation Gauges Differ — how the main inflation gauges are built and why they differ
- How to Read the CPI Report: A Beginner’s Guide — a beginner’s walkthrough of the report
- Producer Price Index (PPI) Explained: Final Demand vs. CPI — final demand and how it relates to consumer prices
- How Social Security COLA Is Calculated: The CPI-W Formula — the index used to adjust benefit payments
- TIPS Explained: How Inflation-Protected Treasuries Work — how Treasury inflation-protected securities work
- Breakeven Inflation Explained: How Bonds Forecast CPI — what bond markets imply about future inflation
Credit and structured products
Corporate, private and securitised debt.
- Private Credit vs Bank Loans vs Syndicated Loans Explained — how the three lending channels differ
- High-Yield Bonds vs. Leveraged Loans: Key Differences Explained — two below-investment-grade markets compared
- Credit Ratings Explained: How Moody’s, S&P, and Fitch Grade Debt — how the rating agencies grade debt
- Fallen Angels vs. Rising Stars: How Bond Migrations Work — what happens when ratings cross the investment-grade line
- Credit Default Swaps Explained: How Bond Insurance Works — how credit protection contracts work
- CLOs Explained: How Collateralized Loan Obligations Work — how collateralised loan obligations are structured
- Mortgage-Backed Securities Explained: Pass-Throughs & CMOs — pass-throughs and CMOs
- Asset-Backed Securities (ABS) Explained: Structure & Tranches — structure and tranches
- Debt Covenants Explained: Affirmative, Negative, and Cov-Lite — affirmative, negative and covenant-lite terms
- Sovereign Debt Explained: How Nations Borrow and Default — how nations borrow and default
- Yankee, Samurai, Kangaroo: Foreign Bonds Explained — foreign-currency bonds issued in other markets
Money markets and funding
Short-term benchmarks and the plumbing beneath them.
- SOFR Explained: How the Post-LIBOR Benchmark Actually Works — the benchmark that replaced LIBOR
- SOFR vs. Fed Funds Rate: Secured vs. Unsecured Benchmarks — secured versus unsecured benchmarks
- SOFR vs. Treasury Bills: Money Market Spreads Explained — how money-market spreads are read
- The Repo Market Explained: $12.6 Trillion of Plumbing — how overnight secured funding works
- Treasury Basis Trade Explained: Repo, Leverage, Risk — repo, leverage and the risks involved
- Treasury General Account Explained: Cash, Reserves, and Liquidity — cash, reserves and liquidity
- Interest Rate Swaps Explained: Fixed-for-Floating and SOFR — swapping fixed for floating
- Commercial Paper Explained: How Companies Issue Short-Term Debt — how companies issue short-term debt
- Money Market Funds Explained: How They Work and Real Risks — how they work and where the risks are
Rates in everyday borrowing
Where policy and market rates reach households.
- How Mortgage Rates Are Set: 10-Year Treasury + Spread — the Treasury benchmark plus a spread
- How Adjustable-Rate Mortgages Work: Resets, Caps, and SOFR — resets, caps and benchmarks
- The Prime Rate Explained: How It Is Set and What It Moves — how it is set and what it influences
Related tools
- Bond Calculator — price, yield and duration for a bond you define
- FOMC Meeting Tracker — upcoming Fed meeting dates and decisions