Tools · Fixed Income
Bond Price & Yield Explorer
A bond's price and its yield move in opposite directions, always. This tool shows why, lets you build a bond and watch the price curve bend as yields move, and pulls today's Treasury yield curve for context.
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Why Do Bond Prices and Yields Move Inversely?
A bond promises fixed cash payments (coupons) plus a lump sum at maturity (face value). Once that bond is issued, its coupon payments are locked in, but the price someone will pay for those future payments changes with prevailing interest rates.
- If new bonds in the market start offering 5% yields, your $50 payment is worth exactly $1,000 to a buyer ($50 ÷ 0.05).
- If market yields rise to 10%, buyers now demand more return for their money. Your fixed $50 is only attractive if you sell the bond for less, specifically $500 ($50 ÷ 0.10).
- If market yields fall to 2.5%, your fixed $50 payment suddenly looks generous, and buyers will pay more for it, $2,000 ($50 ÷ 0.025).
Reference
Bond Market Background
Face Value (Par Value)
The amount the issuer repays the bondholder at maturity, typically $1,000 for corporate bonds. Coupon payments are calculated as a percentage of this value.
Coupon Rate
The fixed annual interest rate the issuer pays, set at issuance and unchanged for the bond's life, regardless of where market yields go afterward.
Yield to Maturity (YTM)
The total annualized return an investor earns if the bond is held to maturity, accounting for coupon payments and any gain or loss between purchase price and face value.
Duration
A measure of a bond's price sensitivity to interest rate changes, expressed in years. Higher duration means more price volatility for a given change in yield. Longer maturities and lower coupons increase duration.
Convexity
Captures the curvature in the price/yield relationship. It means prices rise more when yields fall than they fall when yields rise by the same amount, a favorable asymmetry for bondholders.
Yield Curve Inversion
Normally, longer-term bonds yield more than short-term ones (investors demand extra compensation for tying up money longer). When short-term yields exceed long-term yields, an "inverted" curve, it has historically preceded economic slowdowns, making it one of the most closely watched signals in the bond market.
Interest Rate Risk
The primary risk of holding fixed-rate bonds: when market rates rise, existing bonds with lower coupons become less valuable, and vice versa. This is separate from credit/default risk.