Bonds, Money Markets and Yields

A bond price depends on the amount and date of each promised cash flow. A yield summarises that price; a discount curve prices each payment separately. This lesson develops both calculations, explains duration and convexity, and connects bond holdings to money-market and repo funding.

• price a coupon bond with a single yield and as a portfolio of zeros;
• define YTM, state its reinvestment limitation, and bootstrap a spot from par yields;
• extract a simple forward rate from two zeros;
• state the duration–convexity Taylor approximation and compute a first-order DV01 hedge size;
• describe T-bills, CP, CDs, repo and the shift from LIBOR to SOFR/OIS discounting;
• outline Treasury issuance, STRIPS and the role of the government curve.

1. Zero-coupon and coupon bonds
2. Yield to maturity, spots and the term structure
3. Duration and convexity (Taylor statement)
4. Money markets and repo
5. Government bond markets
6. Price falls as yield rises
7. A yield is not a discount curve