Bond Markets

Bonds are loans. When a government or company issues a bond, they're borrowing money and promising to pay it back with interest. The bond market is larger than the stock market and functions as the backbone of the global financial system. Yields (the interest rate on a bond) move inversely to price — when one goes up, the other goes down. Understanding this relationship is essential for reading every other market.

What it covers

U.S. Treasury bonds are the benchmark — the 2-year, 10-year, and 30-year are the most closely tracked. The yield curve (the relationship between short-term and long-term rates) is one of the most reliable economic signals in finance. Corporate bonds, high-yield ("junk") bonds, and TIPS (Treasury Inflation-Protected Securities) round out the landscape.

What moves it

Fed policy is the dominant force — when the Fed raises the federal funds rate, short-term yields rise. Long-term yields move based on inflation expectations and economic growth forecasts. When investors think inflation will stay high, they demand higher yields on long bonds. The spread between 2-year and 10-year yields (the yield curve) signals credit conditions: an inverted curve (short rates above long rates) has historically preceded recessions.

Key terms

Yield

The annual return a bond pays, expressed as a percentage. If you pay $950 for a bond that pays $50/year, the yield is roughly 5.3%. Yield moves inversely to price.

Yield Curve

A graph of yields across different maturities (3-month, 2-year, 10-year, 30-year). The shape signals growth and inflation expectations. Inverted = short rates above long rates.

Duration

A measure of how sensitive a bond's price is to interest rate changes. Longer duration = more price sensitivity. A 30-year bond loses more value per rate hike than a 2-year bond.

Credit Spread

The extra yield a corporate bond pays above a comparable Treasury. Wider spread = more perceived risk. Spreads widen during stress and tighten during stable periods.

TIPS

Treasury Inflation-Protected Securities. Bonds whose principal adjusts with inflation. The yield on TIPS is the real yield — the return above inflation.

In the newsletter

The Bonds signal covers the 10-year Treasury yield, the yield curve shape, and what it means for equities and the economy. Every other vertical connects back to this one — rates affect housing, tech valuations, corporate borrowing costs, and the dollar.

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Educational content only. Not financial advice. All investing involves risk. Read our full disclosures.