All Thought Leadership Posts

As a bond provides a contractual right to a series of future payments received at specified points of time, the price for a bond is simply the present discounted value of the future cash flows. The face value of a bond will be repaid at maturity. A zer…

Duration matching is not straightforward for bond funds when shares of the bond fund must be sold to meet ongoing retirement expenses. If rates have risen, shares of the bond fund may need to be sold at a loss, with more shares sold to meet a given spe…

Understanding the relationship between bond risk and time to maturity and duration of a bond provides the basis for understanding the bond yield curve. The yield curve shows the yields to maturity for a series of bonds—typically US Treasury bonds—with …

This article is part of a series; click here to read part 1. In 2003, Zvi Bodie and Michael J. Clowes published the book Worry-Free Investing: A Safe Approach to Achieving Your Lifetime Financial Goals, in which they argued that typical retirement-orie…

In discussing retirement liabilities, it is also important to address the issue of inflation and how to think about bonds when they are meant to fund a liability that grows with the consumer price index. Fortunately, this is now practical as the United…

Bond prices are sensitive to interest rate changes, and bond duration is a measure of just how sensitive. For instance, in Exhibit 1.1 (shown in my last article), an increase in interest rates for the simple bond from 3 percent to 4 percent caused the …