Fixed Income

Fixed income risk is driven by yield curves, duration and credit spreads, spanning government bonds priced off risk-free rates to corporate debt priced with an additional spread for default risk. This hub covers how bond investors measure and manage that exposure.

How the market works

A bond is a tradable loan: the issuer pays periodic coupons and repays principal at maturity. Price and yield move inversely, and the two core risks are interest-rate risk — measured by duration (sensitivity to rate moves) and convexity — and credit risk, measured by the spread a bond pays over the risk-free government curve to compensate for default risk. Government bonds (Treasuries, Bunds, Gilts, JGBs) anchor the risk-free curve; corporate, agency, mortgage-backed and emerging-market bonds price at a spread above it. Most trading is over-the-counter through dealers rather than on exchange, and the government yield curve is the reference rate for pricing almost every other asset.

Major trade flows

Fixed income is the largest securities market in the world — global bonds outstanding reached about US$145 trillion in 2024, well over global GDP. Governments are now the biggest borrowers, at roughly 52% of all debt securities, as public debt has climbed since 2020. US markets are the largest single bloc (~40%, ~US$58 trillion, over twice the size of the EU), with US Treasuries the world’s benchmark safe asset and deepest pool of collateral. Cross-border holdings — central-bank reserves, pension and insurance portfolios — make sovereign issuance and central-bank policy the dominant flows.