## Thursday, April 27, 2017

### Monitor Your CD Maturity Dates

This is a quick reminder to those of you with CDs to monitor your CD maturity dates. I have an IRA CD maturing at a credit union in mid-May, and the rates there aren't great. So I logged on, and used online chat to request that the proceeds be deposited into my IRA savings account instead of being rolled into a new IRA CD (which is the default at most banks and credit unions). Within a few seconds, the rep responded that it had been done, and followed up with an email confirmation.

Typically there's a 10-day grace period after the maturity date during which time you can cancel the renewal, but I prefer to do it in advance if possible. It turned out to be very easy at this credit union. Now I'll be hunting for a good IRA CD at a bank or credit union at which I don't already have an IRA CD (I typically put enough in these to get close to the federal deposit insurance limit, which I don't want to exceed). We've been seeing some pretty good deals in recent months, so I'm optimistic.

## Tuesday, April 25, 2017

### Bond Basics: Part 7 (Duration)

Toward the end of the last post in this series, Bond Basics: Part 6, we saw that the change in the price of a bond, for a given change in yield, was related to the bond's term to maturity, and I mentioned that this was related to the bond concept of duration. In this post I'll discuss the concept of duration, especially as it relates to bond funds, which is the way you probably own bonds if you own them at all.

In a nutshell, duration provides a way to calculate an approximate value for the change in bond or bond fund price for a given a change in bond or bond fund yield. In the previous posts in this series, we discussed how bond price and yield move in opposite directions--when one goes up, the other goes down, and vice versa. Duration gives us a simple way to quantify this relationship--at least approximately.

## Monday, January 23, 2017

### Bond Basics: Part 6

In Part 5 of this series on bond basics, I derived the formula to calculate the price of a one-year bond in terms of its yield. I started by developing a formula to calculate something more familiar: the amount you end up with in a savings account after one year. In this part of the series I'll derive the formula to calculate the price of a bond with a term to maturity of more than one year, and again, I'll start with the more familiar concept of compound interest in a savings account.

## Saturday, January 7, 2017

### Bond Basics: Part 5

Much of the discussion in this series on bond basics has been about the inverse relationship between bond yield and bond price: when one goes up, the other goes down, and vice versa. My goal in this post is to help you begin to understand the mathematical formula that specifies bond price in terms of bond yield, since understanding this can facilitate a deeper understanding of bond fundamentals. We can start by considering something familiar: earning interest in a savings account. We can develop the simple formula that describes this, then with some elementary algebra, we can build on it to develop the formula that gives us bond price in terms of bond yield.

## Wednesday, January 4, 2017

### Bond Basics: Part 4

I had planned to start digging into the mathematical formula that relates bond price and bond yield in this post, but first I want to discuss one more example related to the topic discussed in Part 3 of this series. In that part, I explained that we can't make precise statements about the general relationship between interest rates and bond prices, because the yield (and price) of each bond changes differently depending on the bond market's assessment of the term risk and credit risk of that particular bond. Confusion about this is often exposed by questions about the impact of increases to the federal funds rate (FFR) on the prices of bond funds. So following is a brief discussion of this, and then in Part 5 I'll pick up on deriving the formula for bond pricing.