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16 Bonds

The Bonds tab covers US government debt and the funds people hold bonds through. It is here because a share price is argued against the interest rate on government debt more than against anything else, and most people never see that rate.

The yield curve

What the US government pays to borrow, plotted against how long it is borrowing for — 13 weeks (Treasury bills, the closest thing to cash, which tracks what the Federal Reserve is doing right now), 5 years (where the market thinks rates settle over the medium term), 10 years (the world's reference rate — mortgages, corporate borrowing and share valuations are all argued against it) and 30 years (the long bond, the most sensitive to inflation expectations and the most volatile of the four).

The shape is the message. Normally longer money pays more, because lending for thirty years is a longer bet than lending for three months. The page states in words whether the curve is normal or inverted — short money paying more than long, which means the market expects rates to be lower later, and which has historically often preceded recessions, with a long and unreliable lag. It is a description of today's prices, not a forecast.

Each rate, and how it got here

A card per maturity with its own history. One control switches every chart on the page between one year and five at once, because two charts drawn on different ranges cannot be compared by eye and putting them side by side invites exactly that.

Why the price falls when the yield rises

The page explains the seesaw plainly, because it is the most common misunderstanding in bonds: a bond pays a fixed amount, so if newly issued bonds pay more, the older one's price has to fall until owning it returns the same. A rising 10-year yield and a falling TLT price are not two pieces of news. They are one fact drawn twice.

The funds

Eight funds, each with five years of history and a plain line on what it actually holds, arranged from the least rate-sensitive to the most: short Treasuries (SHY, which barely moves when rates change — that is the point of it), intermediate Treasuries (IEF), long Treasuries (TLT, the most rate-sensitive fund most people own, and capable of falling like a share), the whole US investment-grade market in one line (AGG and BND, the same job from two houses), investment-grade corporate debt (LQD, which pays more than Treasuries because a company can fail and a government printing its own currency need not), high-yield corporate debt (HYG — "junk", which pays the most and behaves more like shares than like bonds in a crisis), and inflation-protected Treasuries (TIP, whose principal rises with the CPI; read that one next to the Economic reports tab).

Educational material. Nothing on this tab is advice to buy or sell anything, and no yield on it is a promise about what you would earn.