Old Bonds, New Bonds, and Your Portfolio: Making Sense of Debt and Yields
An image of a business paper
As someone who is naturally curious—and honestly, accidental in just about everything I’ve done—I’m always reading, thinking, and trying to connect dots. Not just for myself, but because I figure if it makes sense to me, it’ll make sense for everyone.
It’s like that saying: If you can make it in New York, you can make it anywhere. I believe that if I can break down complex ideas in a way that I can understand, then anyone can understand them.
Some people want us to feel intimidated by financial jargon. I refuse. And so should you.
When I was in college, I studied 40 hours a week for one math class—just so I could show up and be, well, average. You might think that’s a shame, but I’m actually proud of it. Because today, I want to speak to the average person—the one who wants to understand but doesn’t have time to decode the nonsense.
Today, I spend most of my time going back and forth—feeling like the intermediary between Orv, the community guy, and the Accidental Banker.
Orv—the community guy—cares about what all of this means for everyday people and wants to decode financial jargon for folks just trying to build a better life.
The Accidental Banker just wants to figure it out so he can make better financial decisions and be a stronger banker and leader.
And me? I’m the one keeping everyone balanced.
Okay, I finally got it. But let me tell you—it took a minute.
This is exactly how my mind works on any number of issues or topics. I sit with it, keep thinking, noodling over it until it makes sense—and it’s not about anyone else’s timeline but mine. What about you?
What the Heck is a Yield? Breaking Down Debt in Your Portfolio
Accidental Banker: “Wait, bond prices move in the opposite direction of yields? What does that even mean? And do yields have anything to do with stocks?”
Yeah, I had the same questions. It felt like someone invented financial jargon just to confuse people who aren’t on Wall Street.
So, I started breaking it down—because once you strip away the noise, it’s actually simple.
Step 1: Stocks vs. Bonds—Two Different Worlds
Stocks = Ownership → You’re buying a piece of a company.
Bonds = Debt → You’re lending money to a company, government, or organization.
Totally different animals. So let’s ignore stocks for a second and just focus on debt—the money we borrow and the money we invest in bonds.
Step 2: Two Types of Bonds—Old vs. New
Orv: “Okay, but what does that mean in reality?”
Glad you asked. In the bond world, there are two components:
Old Bonds (Debt) = The ones you already own in your investment portfolio, on your company’s books.
New Bonds (Debt) = The ones being issued today in the market.
Example: Let’s say you have a mix of bonds earning 4% interest in your retirement account or company portfolio.
But what happens if new bonds come into the market offering 5%?
Step 3: The Seesaw—Why Bond Prices and Yields Move Opposite
Accidental Banker: "Wait, so if new bonds pay more, my old bonds are worth less?"
Bingo.
If new bonds offer higher interest rates, older bonds with lower rates become less desirable. To attract buyers, the price of those older bonds drops. Since yield is the return based on price, when bond prices fall, yields rise. That’s why bond prices and yields move in opposite directions.
The Seesaw Effect:
When new bonds offer higher rates → Older bond prices drop.
When new bonds offer lower rates → Older bond prices rise.
Did you catch that? Higher rates mean lower bond prices. Lower rates mean higher bond prices. Simple.
The Seesaw Effect Explained: Bond prices and yields move in opposite directions because the interest (coupon) on a bond is fixed. When new bonds offer better rates, older bonds become less valuable.
Now that we understand why bond prices and yields move in opposite directions, let’s look at a real-world example.
Step 4: Real-World Example
Let’s say you bought a bond last year that pays 4% interest.
If new bonds today are offering 5%, no one wants your 4% bond unless you sell it at a discount.
If new bonds today are offering 3%, your 4% bond is suddenly more valuable, because it pays more than what’s available.
That’s the seesaw effect—bond prices and bond yields always move in opposite directions.
Step 5: Why You Should Care
Orv: “Okay, so how does this actually affect people in the real world?”
Great question, because this isn’t just Wall Street talk—it trickles down to:
Your Mortgage & Home Buying Plans → When yields rise, mortgage rates go up → Homes become more expensive.
Your Credit Card & Loan Costs → When yields rise, credit card and auto loan rates go up → Borrowing costs more.
Your Business Growth → When yields rise, business loans get more expensive → Harder for companies to expand.
Your Retirement Portfolio → If interest rates rise and you own old bonds, they could lose value → You might need to adjust your investment strategy.
Final Takeaway: Know the Seesaw, Control Your Money
Understanding the bond-yield seesaw helps you see where the economy is heading and make smarter financial decisions.
Personal Finance Lessons:
If rates are going up, borrow sooner before loans get more expensive.
If rates are falling, it might be time to refinance and lower your payments.
If you’re a business owner, watch rates closely before taking on new debt.
If you’re an investor, remember that rising rates might hurt bond prices but create new opportunities elsewhere.
Accidental Banker: "Okay, I think I finally got it. Orv, did this make sense to you?"
Orv: "Yeah, and now I know why everyone should be paying attention!"
So, did this help you make sense of bonds, yields, and your financial portfolio?
Drop a comment below and share this with someone who could use a simple breakdown!
#MoneyMatters #FinancialLiteracy #SmartInvesting #InterestRates #WealthBuilding
About Me:
Hi, I’m Orvin Kimbrough—volunteer, board director, and chairman & CEO of Midwest BankCentre. I help professionals scale confidence, leadership, and influence by driving mindset shifts, expanding networks, sharing knowledge, and encouraging bold action.
I share insights on leadership, resilience, and personal growth—rooted in my journey from foster care to CEO. 📖 Twice Over a Man, my recently released book, has been described as inspiring, honest, and transformative. Readers call it a leadership manual wrapped in a powerful, relatable memoir of perseverance and faith.
For more Reflections (and broader lessons learned), visit orvinkimbrough.com