Return vs. price

The annual return if you hold a bond to maturity. When demand for a bond rises, its price goes up — but the fixed coupon is now a smaller percentage of what you paid, so yield falls. This is the inverse relationship: prices up → yields down, prices down → yields up. When you hear 'yields are rising,' the bond market is selling off.

Rate sensitivity (years)

The most important bond risk metric. A duration of 10 years means the bond's price falls roughly 10% for every 1% rise in interest rates. Short-dated T-Bills have very low duration; 30-year Treasury bonds and long-duration ETFs like TLT (~17yr duration) are extremely sensitive to rate changes — they behave like leveraged rate bets.

Economic shape signal

Plot all Treasury yields from 1-month to 30-year and you get the yield curve. Normally it slopes upward — longer maturities pay more to compensate for uncertainty. When it inverts (2-year yield > 10-year yield), the market is pricing in rate cuts ahead — historically one of the most reliable recession predictors. Watch the 2Y–10Y spread.

Default risk premium (bps)

The extra yield a corporate bond pays over an equivalent Treasury. If the 10-year Treasury yields 4.5% and a 10-year investment-grade corporate bond yields 5.1%, the spread is 60 basis points. Spreads widen when investors fear defaults — during 2008, IG spreads hit 600bps. Tight spreads signal confidence; wide spreads signal stress.

Market inflation forecast

The yield gap between a nominal Treasury and a TIPS (inflation-protected Treasury) of the same maturity. If the 10-year Treasury yields 4.5% and the 10-year TIPS yields 2.0%, the 10-year breakeven is 2.5% — the bond market's best guess at average annual inflation over the next decade. Rising breakevens signal inflation expectations are increasing.