How bond yields move, and why stocks care
Bond prices and yields move in opposite directions, and the yield on government debt sets the benchmark against which every other asset is priced.
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Plain-language guides to how markets, the economy and your own money actually work. No jargon left unexplained, nothing to sell you.
Markets guides
Reading an earnings report in ten minutes
Quarterly results follow a predictable structure; knowing where to look lets you separate what the company did from what it is telling you to expect.
7 min read
What an index fund actually holds
An index fund promises to match a benchmark; understanding how the benchmark is built explains what you own, how concentrated it is and where the costs hide.
6 min read
How currencies are priced: rates, trade and risk
Exchange rates reflect interest-rate differentials, trade and capital flows and the demand for safety; knowing which force is dominant explains most currency moves.
7 min read
Business guides
What the central bank does when it changes interest rates
A rate decision is a single number, but its effect travels through bank funding, bond markets, currencies and expectations before it reaches prices and jobs.
6 min read
Compound interest, fees and the maths of long-term saving
Returns compound, but so do costs; over decades, a difference of one percentage point in fees can consume a quarter of a portfolio.
6 min read
How a company goes public: the IPO in plain terms
An initial public offering turns a private company into a listed one; the process involves banks, regulators, a prospectus and a pricing decision that determines who benefits.
7 min read
How card payments settle, and who takes a cut
A card tap takes a second, but the money behind it moves through an issuer, a network, an acquirer and a processor, each of which keeps a slice of the transaction.
6 min read
From the glossary
All terms- APR
- Annual percentage rate: the yearly cost of borrowing expressed as a percentage, including the interest rate and, under most consumer-credit rules, compulsory fees. It is designed to let borrowers compare loans and credit cards on a consistent basis. The representative APR is the rate at least a majority of successful applicants receive.
- Balance sheet
- A financial statement showing what a company owns (assets), what it owes (liabilities) and the difference (shareholders’ equity) at a point in time. The two sides balance by definition: assets equal liabilities plus equity. It is one of the three core financial statements alongside the income statement and cash-flow statement.
- Basis point
- One hundredth of a percentage point, or 0.01 per cent. Interest rates, bond yields and fees are quoted in basis points to avoid confusing a change in a rate with a percentage change of it: a rise from 4.00 per cent to 4.25 per cent is 25 basis points.
- Bear market
- A sustained decline in prices, conventionally defined for equity indices as a fall of 20 per cent or more from a recent peak. The term is also used more loosely for any period of pessimism. The opposite is a bull market.
- Bid-ask spread
- The difference between the highest price a buyer is willing to pay (the bid) and the lowest price a seller will accept (the ask or offer). It is the cost of trading immediately and a common measure of liquidity: narrow spreads indicate an active, liquid market.
- Bull market
- A sustained rise in prices, often defined for equities as a gain of 20 per cent or more from a recent low. Bull markets are typically accompanied by economic growth, rising profits and investor optimism. The opposite is a bear market.
- Cash flow
- The movement of money into and out of a business over a period. The cash-flow statement divides it into operating, investing and financing activities. Free cash flow, operating cash flow minus capital expenditure, is the cash available to pay dividends, repay debt or buy back shares. Profit and cash flow can diverge substantially.
- Central bank
- The institution responsible for a country’s or currency area’s monetary policy, typically charged with keeping inflation at a target and often with supporting employment and financial stability. It sets the policy interest rate, supplies reserves to the banking system, acts as lender of last resort and often supervises banks.
- Chargeback
- The reversal of a card payment initiated by the cardholder’s bank after the cardholder disputes a transaction, for reasons such as fraud, non-delivery or a faulty product. The funds are taken back from the merchant’s acquirer, which debits the merchant. Merchants can contest chargebacks with evidence and face penalties if their chargeback rate is high.
- Compound interest
- Interest calculated on both the original principal and the interest already accumulated, so that the balance grows at an accelerating rate. Over long periods the effect is large: money doubling roughly every 72 divided by the annual rate in years. It works in a saver’s favour on deposits and against a borrower on debt.