Bonds and Fixed Income: Lending Money for Interest

A bond is a borrower’s promise: periodic coupons and principal at maturity. The Investment Company Institute tracks global bond markets on the order of tens of trillions of USD—larger than public equity by notional.

“Fixed income” is a label, not a guarantee—prices still swing when rates move.

Yield solves the discount rate that prices the cash flows. Modified duration approximates % price change for a parallel yield shift—rough guide, not options-aware convexity.

The yield curve plots Treasury yields by maturity. Brief inversions (2s10s < 0) preceded many U.S. recessions; false positives exist too—macro is messier than a single chart.

The 10-year U.S. Treasury yield anchors discount rates for long-duration equities and crypto narratives. In 2022, rapid Fed hikes lifted real yields; high-beta assets repriced hard alongside growth stocks—not because “bonds beat BTC,” but because the risk-free rate rose.

Silicon Valley Bank held long-duration bonds when the Fed moved from near-zero toward 5%+ policy rates. Unrealized HTM/AFS losses ballooned; when deposits fled, selling crystallized losses and equity vaporized—the FDIC placed SVB into receivership March 10, 2023.

The villain was duration and liquidity, not crypto on the asset side—though contagion hit sentiment everywhere.

Watch real yields (TIPS breakevens), dollar index, and curve shape—not just spot BTC. When DeFi stable yields sit below T-bills, you are taking smart-contract risk for less carry—make that explicit.