[Verse 1] Sarah buys a bond that pays her five percent each year Every coupon check arrives exactly as it's engineered Ten thousand dollars borrowed, five hundred always flows Fixed-rate certainty, that's how this story goes [Verse 2] Meanwhile Jack selects a floater tied to treasury rates When benchmark numbers climb or fall, his payment fluctuates SOFR plus two percent becomes his monthly bread Variable income streams dance inside his head [Chorus] Fixed stays steady when the market shakes Floating follows every move the benchmark makes Interest rate risk splits two different ways Fixed fears rising, floating dreads the fall of rates [Verse 3] Market rates spike up to eight from where they used to be Sarah's locked at five percent, opportunity flees Jack's floater lifts with tide, now earning seven-three His payments grew while hers stayed put stubbornly [Verse 4] But when the cycle turns and rates come crashing down Jack's income shrinks to two while Sarah keeps her crown Fixed-rate holders smile when benchmark numbers slide Floating-rate investors watch their payments slowly die [Chorus] Fixed stays steady when the market shakes Floating follows every move the benchmark makes Interest rate risk splits two different ways Fixed fears rising, floating dreads the fall of rates [Bridge] Duration matters more when coupons never change Price sensitivity makes fixed bonds feel strange Floaters reset quickly, shield from price decay Different risks demand different hedging play [Outro] Choose your poison wisely in the bond parade Fixed or floating, either way the price gets paid
← Municipal Bonds: Tax-Advantaged Local Government Debt | Special Bond Types: Zero-Coupon and Inflation-Linked →