Recent weeks have seen investors’ first encounter with “crash level” volatility since the financial crisis of 2008. During periods like these, most media and investor attention focuses on the stock market. That’s where the largest losses pile up, plus it’s the aspect of investing most familiar to individual investors.

Dig deeper though and you’ll find these crises typically arise from trouble in the credit (bond) markets. Companies can live with temporarily depressed stock prices, but many can’t function without access to the credit markets. Often, actions taken by the Federal Reserve that investors interpret as a reaction to falling stock prices actually are interventions targeted to keeping the credit markets running smoothly. Sadly, the past month has been anything but smooth.

Bond construction

To understand the bond landscape, it’s important to grasp the two axes on which bond investments pivot.

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