Bond Markets
How fixed income securities provide predictable returns and fund governments
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0 / 5 completedWhat Bond Markets Do
Bonds are IOUs—investors lend money to governments or corporations in exchange for regular interest payments (coupons) and repayment of principal at maturity. Bond markets are massive: $130T globally, dwarfing stock markets. They fund infrastructure, wars, corporate expansion, and deficit spending.
Bonds vs Stocks
| Feature | Bonds (Debt) | Stocks (Equity) |
|---|---|---|
| Ownership | You're a lender | You're an owner |
| Returns | Fixed interest (predictable) | Dividends + appreciation (variable) |
| Risk | Lower (paid first in bankruptcy) | Higher (paid last) |
| Upside | Limited (capped at coupon) | Unlimited |
| Maturity | Fixed end date | Perpetual |
Types of Bonds
US government debt. Safest investment on Earth. No default risk. Used as benchmark for all other bonds.
Company debt. Higher yields than Treasuries. Credit ratings matter—AAA safest, junk bonds risky.
State/local government debt. Tax-free interest for residents. Fund roads, schools, sewers.
Developing country debt. High yields (8-15%) but currency/political risk. Defaults happen.
Interactive: Compare Bond Types
Select bonds to compare risk vs reward:
| Bond | Yield | Rating | Risk Level | $10K Annual |
|---|---|---|---|---|
| 10Y Treasury | 4.3% | AAA | Lowest | $430 |
Bond markets are bigger than stock markets but get less attention. Central banks use Treasury bonds to implement monetary policy. When Fed buys bonds, prices rise and yields fall.