Bonds Work — How Does Buying

As of April 2026, the bond market is in a "stubborn equilibrium," where nominal yields remain attractive—with the 10-year Treasury yield recently hovering around 4.3%—even as expectations for interest rate cuts have moderated. 1. How Bonds Generate Return There are two primary ways you make money with bonds:

: Issued by companies. These offer higher yields but carry more risk if the company cannot pay its debts. 3. How to Buy Bonds You can purchase bonds through three main channels: What is a Bond and How do they Work? - Vanguard how does buying bonds work

: Issued by states or cities. Interest is usually federal tax-exempt and often state tax-exempt if you live in the issuing state. As of April 2026, the bond market is

: If you buy a bond at a discount (below its face value) or sell it for more than you paid before it matures, you earn a profit. 2. Choosing Your Bond Type These offer higher yields but carry more risk

Buying bonds is essentially acting as a lender to a government or corporation. In exchange for your "loan," the issuer promises to pay you regular interest (the coupon) and return your original investment (the principal) on a set date (maturity).