bond EDUCATION
Core Bonds
The stabilising bond foundation of a balanced portfolio.
A core bond fund is a diversified mix of high-quality bonds designed to provide stability, regular income and portfolio balance. Instead of buying one bond, the fund spreads exposure across several bond sectors.
Inside a Core Bond Fund
Government bonds
40%
Agency / government-related debt
25%
Securitised bonds
20%
Investment-grade corporate bonds
15%
Diversified. High quality. Built for stability.
Helping to smooth the journey and support long-term outcomes.
Bond Fundamentals
EDUCATION MODULE
A simple framework to understand how bonds work, what investors receive, and which terms matter before allocation.
The Analogy
While a stock makes you a co-owner of a firm’s future profits, a bond makes you a creditor. You are not primarily betting on speculative growth; you are financing a borrower in exchange for scheduled interest payments and repayment priority at maturity.
Market Insight
Bond prices and yields move in opposite directions. When interest rates rise, existing bonds with lower coupons usually lose value. When rates fall, existing bonds become more attractive and their price tends to rise.
Key Vocabulary
- • Nominal Value: the principal amount repaid at maturity.
- • Maturity: the date when the bond is repaid.
- • Coupon: the periodic interest paid to the investor.
- • Redemption: the final repayment of capital.
- • Yield: the return implied by the bond’s price, coupon and maturity.
Why Bond Prices Move
Bond prices and market interest rates usually move in opposite directions.
When new bonds offer higher yields, older bonds with lower coupons become less attractive. Their price usually falls so that investors receive a return closer to the new market rate.
The inverse rule
Rates up usually means bond prices down. Rates down usually means bond prices up.
Duration amplifies the move
Longer-duration bonds usually move more when interest rates change.
INTEREST-RATE MECHANICS
RATES ↑
BOND PRICES ↓
Core rule: prices adjust so old bonds remain competitive with new market yields.
SMART CASH
Earn While Waiting
How short-term government bills can keep idle cash productive.
Treasury Bills are short-term government debt instruments bought below their final value and repaid at maturity. They help keep cash productive with low risk while investors wait for better opportunities.
Core idea
A simple framework to understand how bonds work, what investors receive, and which terms matter before allocation.
Helping to smooth the journey and support long-term outcomes.
3-Month Treasury Bill Example
$10,000 invested at a 3.6% annualized yield
Start
Month 1
Month 2
Maturity
Initial
Gain
Value
$10,000
+$90
$10,090
Illustrative example based on a 3.6% annualized 3-month Treasury Bill yield.
BOND EDUCATION
Key Bond Terms
A simple glossary of the bond concepts investors need before comparing bond funds, yields and risks.
01
Issuer
The government, company or institution that borrows money by issuing the bond.
Why it matters: the issuer’s financial strength affects credit risk.
04
Yield to Maturity
The estimated annual return if the bond is held until maturity and all payments are received.
Why it matters: it helps compare bonds with different prices and coupons.
These terms are especially important when comparing core bond funds, short-duration funds, corporate bond funds and inflation-linked bonds.
02
Coupon
The interest paid by the bond, usually at fixed intervals.
Why it matters: it contributes to the income investors receive.
05
Duration
A measure of how sensitive a bond or bond fund is to interest-rate movements.
Why it matters: higher duration usually means the price moves more when rates change.
03
Maturity
The date when the bond is scheduled to repay its principal.
Why it matters: longer maturities usually mean more sensitivity to interest-rate changes.
06
Spread
The yield difference between a bond and a safer benchmark government bond.
Why it matters: wider spreads usually signal higher perceived credit or liquidity risk.
BOND EDUCATION
Types of Bonds
Different bond types carry different risks, income profiles and portfolio roles.
GOVERNMENT
Sovereign Bonds
Debt issued by national governments. Often used for safety, liquidity and interest-rate exposure.
Dominant risk: rates, fiscal strength and currency exposure.
Investment-Grade Corporate Bonds
CORPORATE
Debt issued by companies with stronger credit profiles. Usually used for income above government bonds.
Dominant risk: credit downgrades and spread widening.
CREDIT RISK
High-Yield Bonds
Debt issued by lower-rated companies. Offers higher income potential but behaves more like risk assets in stress.
Dominant risk: default risk and recession sensitivity.
INFLATION
Inflation-Linked Bonds
Bonds designed to adjust with inflation measures such as CPI.
Dominant risk: lower relative return if inflation falls or real yields rise.
RATE RESET
Floating-Rate Notes
Bonds whose coupons reset periodically with reference rates.
Dominant risk: income falls when central banks cut rates.
DISCOUNT
Zero-Coupon Bonds
Bonds sold at a discount and repaid at face value without regular coupons.
Dominant risk: high sensitivity to interest-rate changes.
REPAYMENT OPTION
Callable Bonds
Bonds that can be repaid early by the issuer before maturity.
Dominant risk: reinvestment risk when rates fall.
FUND STRUCTURE
Aggregate Bond Funds
Funds or ETFs that combine multiple bond sectors into one diversified product.
Dominant risk: fund duration, credit mix and daily price fluctuation.
For the portofolio, the focus is usually on diversified core bond exposure, investment-grade quality, moderate duration and selective inflation protection rather than speculative credit risk.
BOND EDUCATION
Bond Risks
What can affect bond prices, income and portfolio stability.
Risk
What it means
How it appears
What to monitor
Credit / default
The issuer may struggle to repay interest or principal.
Bond prices fall; ratings may be downgraded.
Credit spreads, rating changes, issuer financials.
Interest-rate risk
Bond prices usually fall when market rates rise.
Existing bonds become less attractive than new higher-yield bonds.
Central-bank policy, inflation data, yield curves.
Inflation risk
Inflation reduces the real purchasing power of fixed payments.
Coupon income buys fewer goods and services.
CPI, wage growth, energy prices, inflation expectations.
Liquidity risk
It may be difficult to sell a bond or fund position at a fair price.
Wider bid-ask spreads and weaker execution.
Trading volumes, ETF spreads, market stress indicators.
Call risk
The issuer may repay the bond early.
Investors lose a higher coupon and must reinvest at lower rates.
Callable bond terms and falling-rate environments.
Floating-rate income risk
Variable coupons reset lower when reference rates fall.
Income declines as benchmarks move down.
€STR, Euribor, SOFR and central-bank rate paths.
Currency risk
Foreign-currency bonds move with exchange rates.
Returns change when converted back to the investor’s currency.
FX volatility and hedging status.
Reinvestment risk
Future income may be lower when bonds mature or coupons are reinvested.
Cash is reinvested at lower yields.
Maturity schedule and prevailing yield levels.
Important: core bond funds are designed to reduce portfolio volatility, but they are not risk-free. Their value can move with interest rates, credit spreads, inflation expectations and market liquidity.