Bond maths without a dealing desk
International guides
These guides cover the shared machinery: coupon versus yield, duration, convexity, inflation-linkers, and how a household actually transacts. The examples use UK gilts, US Treasuries, bunds, BTPs, OATs and Swiss Confederation bonds because those are the curves on our live board.
Yield to maturity is an internal rate of return, not a promise. Duration is a sensitivity, not a holding period. If a number is a market yield, we date it and name the source on the live board.
Read first. The comparator and calculators are teaching tools. Nothing here is a personal recommendation.
- 1What Are Government Bonds? Complete Beginner's GuideA government bond is a loan to a state: coupon plus repayment of principal, traded every day before maturity.
- 2How Do Government Bonds Work?Issue, coupon, yield, secondary market, maturity. The same skeleton in London, Washington, Frankfurt and Rome.
- 3How to Buy Government BondsBrokers, ISAs/IRAs, TreasuryDirect, ETFs and funds. Direct bonds versus funds is the first fork.
- 4How Bond Prices and Yields WorkPrice and yield are two languages for one fact: the discount rate on future coupons and par.
- 5Why Do Bond Prices Fall When Interest Rates Rise?New bonds then offer higher coupons, so old lower-coupon bonds must cheapen until their yield matches the market.
- 6Why Do Bond Yields Rise?Yields rise when investors demand more return: inflation, expected rate hikes, more supply, or less risk appetite for duration.
- 7What Is Bond Yield to Maturity?YTM is the annualised return if all coupons are paid, par is repaid, and coupons are reinvested at the YTM itself.
- 8What Is Bond Duration?Duration is interest-rate sensitivity. Higher duration means a bigger percentage price change for a 1% yield move.
- 9What Is Bond Convexity?Convexity is the curvature: duration’s linear guess understates gains when yields fall and overstates losses when yields rise (for vanilla bonds).
- 10Government Bonds vs Corporate BondsSovereigns price the risk-free curve (in their currency). Corporates add a credit spread that can blow out in stress.
- 11Government Bonds vs StocksContractual income versus residual equity. Different roles: ballast versus growth.
- 12Government Bonds vs Bank DepositsDeposits: par stability and deposit insurance (up to a cap). Bonds: market price, possibly higher locked yield, sovereign credit.
- 13Fixed-Rate vs Inflation-Linked BondsNominals: known cash, unknown real. Linkers: known real (index permitting), unknown nominal.
- 14Short-Term vs Long-Term Government BondsShort: less duration, more reinvestment risk. Long: more duration, more lock-in. Ladders blend both.
- 15How Inflation Affects Government BondsInflation is the silent rival of fixed coupons. Central banks fight it with rates, which then hit prices via duration.