Bonds / Fixed Income
A bond is a loan: you lend money to a government or a company and receive periodic interest (the coupon) plus the principal at maturity. It is the largest market in the world by amount issued, and the one that rules: bond yields are the price of money, and everything else is valued off them.
By the TradingCalculator.Pro team · Updated on · About us
Start your 7-day free trial →Open the interactive fact sheet →
Frequently asked questions
Why do bond prices fall when interest rates rise?
Because your bond pays a fixed coupon. If you bought one paying 3% and tomorrow the government issues new bonds at 4%, nobody will buy yours at the same price: for it to deliver the same return, its price must fall until its yield matches 4%. It is arithmetic, not sentiment.
What is bond duration?
The measure of how much a bond's price moves for a change in rates. A modified duration of 8 means a one percentage point rate rise cuts the price by about 8%. The longer the maturity and the lower the coupon, the higher the duration and the greater the risk.
What is a country risk premium?
The spread between a country's 10-year bond yield and Germany's at the same maturity, measured in basis points. It shows how much extra interest the market demands to lend to that country instead of Germany, which is taken as the eurozone's risk-free reference.
What does an inverted yield curve mean?
That short-dated bonds pay more than long-dated ones, the opposite of normal. It signals the market expects rates to fall, usually because it anticipates a slowdown. Historically, the US 2-10 year inversion has preceded every recession since 1955, with a lag of 6 to 24 months.
How can a retail investor buy bonds?
Directly at national treasury auctions or through a broker in the secondary market, though minimum sizes can be high. The most accessible route is fixed income ETFs, which give diversified exposure at any amount — at the cost of having no fixed maturity date.