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

Only you (ideally with a professional) can make the call — but here's how people generally think it through:

• Match maturity to your timeline. Need the cash in a year? A 1-year bill. Saving for a decade out? A 10-year note. Held to maturity, you know exactly what you get.
• Decide how much price-swing you can stomach. Longer bonds pay more but move more if you sell early (that's duration).
• Consider a ladder. Buying several maturities (1y, 2y, 3y…) spreads rate risk and keeps cash maturing regularly.
• Mind taxes. Treasury interest is federally taxable but generally exempt from state and local income tax.
• Remember what this site is. Research. It doesn't sell anything or tell you what to buy — confirm details with TreasuryDirect or your broker, and talk to a financial professional for real decisions.