Start here — A bond converts a promise of future payments into a price today. This path begins with what a newcomer sees, then adds calculation and trading controls, and finally separates curve, spread, option and funding risks.
Fixed income does not mean a fixed price or a certain outcome. A bond can pay fixed, floating or indexed coupons; its value responds to rates, credit, liquidity and contract terms. Credit analysis adds the possibility that promised payments change or fail and that recovered value is uncertain.
This map reconstructs public, established concepts. It does not prescribe trades or anticipate proprietary Emiciclo Method rules.
Level 1 — Understand what you are looking at
Begin with Bonds: issuer, face value, coupon, maturity and rank define the contract. Then separate quote from settlement with Clean price, dirty price and accrued interest. Clean price excludes accrued coupon; full price includes it.
Continue with YTM, current yield and yield to call. Coupon is a contractual rate on face value; current yield relates annual coupon to price; YTM compresses price, dates and promised flows into one rate; YTC uses an early-redemption scenario. None is a guaranteed realised return.
The yield curve relates yields to maturities. Normal, flat or inverted is a dated description of a market and instrument set, not a sufficient trading signal.
Guiding question: which cash flows arrive, when, in which currency and against what full price?
Level 2 — From security to market
Issuance, auctions and secondary trading separates funding a new security from later trades among investors. Allocation rules, settlement, bid-ask and depth determine what can actually be executed.
Carry and roll-down attributes holding-period return. Carry includes cash and funding under a convention; roll-down revalues the shorter residual maturity while assuming an unchanged curve. It is an attribution scenario, not a forecast.
FRNs and inflation-linked bonds add resets, spreads, price indices, lags and basis risk. A floating coupon does not remove rate risk; indexed principal does not guarantee personal purchasing power.
Guiding question: how are price and settlement formed, and which assumptions turn cash flows into return?
Level 3 — Measure rate risk
Bond duration approximates a local sensitivity; convexity describes part of price-yield curvature; DV01 translates one basis point into money. These are established Cyclepedia support pages and remain separate.
Key-rate duration distributes sensitivity across nodes. It explains why equal total duration can respond differently to steepening, flattening and twists. Preserve curve, interpolation, bump, sign and timestamp.
These measures do not automatically cover credit, inflation, currency, liquidity or optional cash flows. Large or simultaneous shocks require full scenario repricing.
Guiding question: which curve and node move, what remains fixed, and in which unit is the effect reported?
Level 4 — Separate spread, default and options
Credit spread and CS01 distinguishes distance from a chosen curve from monetary sensitivity to one spread basis point. G-spread, Z-spread and OAS are not synonyms; OAS depends on an option model.
Ratings, default, recovery and LGD connects ordered opinions, probabilities, exposure and loss. PD × LGD × EAD is useful only with consistent definitions and horizons; it is not maximum loss and does not cover liquidity or concentration.
Calls, puts and prepayment shows how the holder of a contractual right can change cash-flow timing. When flows change, effective duration, OAS and scenario analysis replace fixed-flow shortcuts.
Guiding question: which portion of yield compensates credit, liquidity or optionality, and who controls repayment timing?
Level 5 — Understand short-term funding
Money market, repo and overnight rates follows cash and collateral. Haircuts, margining, settlement and rollover define the exposure. SOFR is a broad U.S. Treasury-collateralised overnight benchmark within the New York Fed methodology, not every deal's rate.
Funding connects positions to market plumbing: a profitable mark can still face margin calls or fail to roll. Reconcile gross return with costs, collateral and liquidity.
Guiding question: who supplies cash, which collateral protects the trade, and what happens if funding and asset price move together?
One workflow for any bond
- Identify issuer, issue, currency, seniority and documents.
- Map cash-flow dates and amounts, including calls, puts and indexation.
- Reconcile clean price, accrual, dirty price, quantity and settlement.
- State yield, curve, spread and conventions without mixing units.
- Measure duration, convexity, DV01, KRD and CS01 only for named factors.
- Build curve, spread, default, recovery, option and liquidity scenarios.
- Include funding, collateral, costs and exit capacity.
- Preserve data, timestamp, model and reconciliation residual.
The sequence does not produce an automatic verdict. It produces a verifiable question and prevents one yield number from hiding the underlying risks.
Sources
- Investor.gov — Bonds or Fixed Income Products
- FINRA — Bonds
- Federal Reserve Board — H.15 Selected Interest Rates
- U.S. Treasury — Daily Treasury Par Yield Curve Rates
- Federal Reserve Bank of New York — SOFR
- Basel Committee — Basel III: Finalising post-crisis reforms