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FOLITIC / BONDS EXPLAINED

Bonds Explained

Understand bond cash flows, compare yields and assess the risks behind a repayment promise. Follow six learning stages from the first bond contract to a complete investment research case.

Start with What a bond is and how you get paid, then follow the next lesson links. Explore 24 lessons with worked examples, exercises and further reading.

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Bond Foundations

Understand the bond contract, its cash flows and the way bonds are quoted.

Beginner

What a bond is and how you get paid

A bond starts with a lending agreement. Learn who owes you money, how payments work and why a promise is different from a guarantee.

Beginner

Face value coupons and maturity explained

Separate the amount owed from the price paid. Map coupons, payment frequency and maturity before comparing any bond yield.

Beginner

How to read a bond quote and accrued interest

The displayed bond price may exclude interest owed to the seller. Learn to turn a quote into the amount that actually settles.

Beginner

How bonds differ from stocks and cash

Bonds, shares and cash serve different purposes. Compare their claims, payment uncertainty and exposure to inflation before allocating money.

Bond Types and Structures

Recognise different issuers, payment structures and contractual options.

Beginner

Government bonds and sovereign risk

Government debt is not one uniform investment. Examine the issuer, repayment currency and fiscal capacity before treating a sovereign bond as a benchmark.

Beginner

Corporate bonds and the creditor hierarchy

The company name is only the beginning. Identify the issuing entity, collateral and seniority to understand where a bond sits among competing claims.

Beginner

Inflation linked and floating rate bonds

Inflation protection and a floating coupon solve different problems. Learn what resets, what stays fixed and which risks remain.

Beginner

Callable bonds and securitised debt

Some bonds give someone else control over payment timing. Learn how calls and loan prepayments can alter the cash flows you expected.

Pricing and Yields

Connect cash flows with prices, yield measures and the yield curve.

Intermediate

Why bond prices move when yields change

A fixed payment becomes less valuable when investors require a higher return. Use a simple valuation to see why bond prices and yields move in opposite...

Intermediate

Coupon rate current yield and yield to maturity

A coupon rate, current yield and yield to maturity answer different questions. Compare the cash payment, purchase price and complete repayment schedule.

Intermediate

Yield to worst and reinvestment risk

A generous coupon can hide an unfavourable call. Compare redemption paths and follow what happens to coupons after they arrive.

Intermediate

Reading the yield curve and credit spreads

The yield curve compares maturities. A credit spread compares a bond with a benchmark. Learn to read both without turning them into a certain economic forecast.

Risk and Credit Analysis

Assess rate sensitivity, repayment capacity, liquidity and purchasing power.

Intermediate

Duration convexity and interest rate risk

Maturity is a date. Duration measures sensitivity. Add convexity to understand why a straight line approximation becomes less reliable for larger yield changes.

Intermediate

How to assess an issuer’s ability to repay

Credit analysis asks where the repayment money will come from. Connect the business model, cash flows and maturity schedule before relying on a rating.

Intermediate

Default recovery and liquidity risk

A bond can lose value before a missed payment. Separate default probability, recovery severity and the cost of finding a buyer.

Intermediate

Currency inflation and real bond returns

A positive bond return can still buy less. Translate returns into your spending currency and adjust for inflation to measure the outcome that matters.

Portfolio Construction

Build portfolios around spending needs, diversification and trading costs.

Advanced

Individual bonds versus bond funds

Owning a bond and owning a bond fund are different structures. Compare repayment dates, diversification, liquidity and costs before choosing a vehicle.

Advanced

Building a bond ladder around your cash needs

A bond ladder spreads maturity dates across time. Start with the cash you need, then decide which receipts will be spent and which will be reinvested.

Advanced

Diversifying a bond portfolio without hiding risk

Counting bonds is not the same as measuring diversification. Look for shared exposure to issuers, industries, currencies and changes in the yield curve.

Advanced

Buying selling and evaluating bond trading costs

The headline quote is only part of a bond trade. Compare executable prices, compensation and settlement cash for the exact security and trade size.

Advanced Bond Analysis

Compare securities, test difficult scenarios and complete a bond research case.

Advanced

How to compare bonds on a consistent basis

Two yields are comparable only after their conventions and risks are aligned. Build a clean comparison before deciding that one bond offers more value.

Advanced

Stress testing a bond portfolio

A portfolio should be tested against more than one rate forecast. Separate benchmark rates, credit spreads, currency and liquidity before combining adverse scenarios.

Advanced

Matching liabilities and hedging duration

A portfolio can look stable while failing to meet a future bill. Match the timing and currency of liabilities, then understand what duration hedging can and...

Advanced

A complete bond investment case

Bring the learning path together in a complete research case. Describe the security, calculate the economics, challenge repayment assumptions and write a conditional conclusion.

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