Bonds, explained from scratch

What even is a bond?

When you buy a Treasury, you are lending money to the U.S. government. In return it pays you interest on a fixed schedule (the coupon), then hands your original money back on a set date (maturity). That's the whole idea — a loan with a fixed timetable.

Because the government does the repaying, you're (effectively) certain to be paid. The interesting question isn't "will I get paid?" — it's "what return do I get, and what happens to the price in between?"

The five flavours of Treasury

They differ mainly by how long until you get your money back:

• Bill Bills — 1 year or less. No coupon; you buy below 100 and get 100 back.
• Note Notes — 2 to 10 years. Pay a coupon every six months.
• Bond Bonds — 20 or 30 years. Same coupon idea, just longer.
• TIPS TIPS — principal grows with inflation (the CPI).
• FRN FRNs — the coupon floats with the 13-week bill rate.

Price and yield are a seesaw

This is the one idea that trips everyone up: when a bond's price goes up, its yield goes down — and vice versa. The future payments are fixed. Pay more for that fixed stream and your return (yield) shrinks; pay less and your yield grows.

So a bond "getting more expensive" and "yielding less" are the same event. On this site the price is computed from the yield curve — which is why we call it indicative.

Three "yields" — which to trust

The yield curve — the master picture

Plot the yield for every maturity and you get the yield curve. It's the most important chart in the bond world, and it sets the price of every Treasury on this site. Usually it slopes up (longer = higher yield). When it slopes down, it's inverted — short-term yields above long-term — which historically signals markets expect rates to fall.

See the live version any time on the Yield curve page.

Duration = how much rates can sting

Rates move. When they rise, the price of bonds you already own falls (the seesaw again). Duration tells you how hard: a duration of 10 means roughly a 10% price drop if rates rise 1%. Short bonds barely flinch; long bonds swing a lot.

That's the real risk with Treasuries: not default (the government pays), but the price wobbling while you hold. Hold to maturity and you get par back regardless — duration only bites if you sell early. Every security page has a rate-sensitivity table showing this for that bond.

How to read a page on this site

• fetched The Terms — coupon, maturity, par — are the fixed facts, set when the bond was issued.
• computed The metrics — price, yields, duration — are calculated here from those terms plus today's curve.
• indicative The price is a model estimate off the curve, not a live market quote.
• The cash-flow timeline draws every payment you'd receive, from issue to maturity.

Want the full method? It's all on the Methodology page.

Who can actually buy it: public vs institutional

Not every bond is something an ordinary person can buy. Two things decide it: whether the bond was sold to the public (SEC-registered) and how big the minimum purchase is. Every bond page here shows a Public access light:

• Public — anyone can buy it through a normal brokerage account. Treasuries are the easiest of all: a $100 minimum on TreasuryDirect. Most registered corporate and agency bonds run roughly a $1,000–$2,000 minimum.
• Mostly institutional — it's public, but sold in large blocks ($100,000+ minimums), so in practice it's pension funds, insurers and other big buyers who own it.
• Institutional only — a private placement under Rule 144A, sold only to “qualified institutional buyers” (large funds, banks, insurers). The general public can't buy these at all.

One trap to know about: some big banks issue complex structured notes (principal-at-risk products tied to stocks or an index) that look like bonds but aren't plain debt. They're a different, riskier product — not the plain bonds this site is about.

The CUSIP — the number you give your broker

Every bond has a CUSIP: a unique 9-character ID that pins down exactly which bond. A single company can have dozens of bonds with different coupons and maturities — the CUSIP is how you, and your broker, make sure you're buying the right one. When you place an order you give your broker the CUSIP (or search by it); it's the bond world's equivalent of a product barcode.

It isn't a plain number — it has letters in it and is often written with a space, so 459200 LQ2 means 459200LQ2. A longer code beside it starting “US…” is the ISIN — the same bond in international format.

Because the bonds here are representative samples, every bond page has a “Get this bond's CUSIP” button that opens the issuer's official SEC filing, where the real CUSIP is printed — the number to hand your broker.

How people actually decide

Nobody can tell you what to buy — and this site never will. But experienced bond investors tend to work through the same handful of questions, roughly in this order. Walk them in order and a bond either fits your situation or it doesn't.

1. Start with the job the money has to do. Your time horizon sets the maturity. Need the cash in a year? A 1-year bill. Saving for a decade out? A 10-year. Money you won't touch for ages can go longer to pick up extra yield. The key fact: if you hold to maturity, you get par back regardless of what the price did in between — so matching maturity to your timeline removes most of the drama.
2. Separate the two kinds of risk — they're completely different. Credit risk — will the issuer actually pay you back? This is what the credit rating measures. U.S. Treasuries carry effectively none; corporates and agencies carry some, and the lower the rating, the more. Also check seniority: senior bondholders are paid before subordinated ones if an issuer defaults. Interest-rate risk — what if you sell before maturity? Then the price moves opposite to rates, and duration tells you how hard: a duration of 8 means roughly an 8% price drop if rates rise 1%. Long bonds swing a lot; short bonds barely flinch. Hold to maturity and this never bites.
3. Ask what the yield is paying you for. A higher yield is never free — it's compensation for more risk (weaker credit, longer duration, or a call feature). Compare a corporate's yield to a Treasury of the same maturity: that gap is the spread, and it's exactly what you're being paid to take on the credit risk. Then ask yourself whether that extra is worth it to you.
4. Watch out for the call. A callable bond lets the issuer pay you back early — and they'll do it when it suits them (usually after rates have fallen), which is the worst time for you, because you'll have to reinvest at lower rates. That's why we show Yield to Worst on callable bonds: it assumes the least-favourable outcome, not the rosy one. Don't judge a callable on its yield-to-maturity alone.
5. Confirm you can actually buy it. Check the Public access light on the bond. Some bonds are retail-friendly (small minimums you can buy through any brokerage); some are sold only in large $100,000+ blocks; and some are institutional-only private placements (Rule 144A) the public can't buy at all. No sense falling for a bond that isn't available to you.
6. Think in after-tax terms. What you keep is what matters. Treasury interest is taxed federally but is generally exempt from state and local income tax; corporate and agency interest is usually fully taxable; municipal bonds (coming later) are often federally tax-exempt. A lower headline yield can win once taxes are counted — a tax professional can run your specific numbers.
7. Don't put it all in one bond — ladder and diversify. Buying several maturities (1y, 2y, 3y, 5y…) — a ladder — smooths out rate risk and keeps cash maturing on a regular schedule that you can reinvest or spend. Spreading across different issuers limits the damage if any one of them runs into trouble.
8. Verify everything before you commit. This site is the starting point, not the finish line. Pull the bond's real CUSIP from the official filing, read the actual prospectus terms, confirm the live price and minimum with your broker, and — for any real decision — talk to a licensed financial professional. The numbers here are indicative models, not quotes.