The price of time

Interest is the price of time: what you are paid to wait, and what you pay to borrow the future. Every asset price is downstream of it.

Why this matters

Rates are the gravity of finance. A bond is a loan you can sell; its yield is the price of waiting, and its price moves inversely to that yield. Learn this and the bond market becomes legible — which matters, because the bond market is where the biggest money is priced.

Real and nominal is the distinction that trips up most beginners. A 5% yield against 4% inflation is a 1% real return; the nominal number tells you what you were paid, the real number tells you what you gained. Everything durable in investing is decided in real terms.

Then the mechanical fact that separates people who understand bonds from people who quote them: duration. A 1% rise in yields costs a 30-year bond about 15% of its price. Why a 1% rise costs a 30-year 15% is its own lesson.

Watch

• MIT OpenCourseWare — 14.02 Principles of Macroeconomics ↗
  The real thing, free, in order. If you commit to one structured course, this is it.
• Patrick Boyle ↗
  Ex-hedge-fund, a professor at King's. Best signal-to-noise on rates, risk and market structure. Start with his bonds and yield-curve talks.

Read — our own explanation

• The Price of Time
• Real Interest Rate
• Basis Point
• Duration
• Why a 1% Rise Costs a 30-Year 15%

Verify at the source

• US Treasury — Daily Treasury Par Yield Curve ↗

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