{"url":"https://etfiq.com/academy/building-wealth/bonds-for-income/","section":"academy","title":"Bonds for income: duration and the rate cushion | ETFIQ","description":"Learn what duration means for a bond fund's price, and how far rates can rise before a year's income is gone, on three real Treasury ETFs.","as_of":"Nov 10, 2026","structured_data":[{"@type":"LearningResource","@id":"https://etfiq.com/academy/building-wealth/bonds-for-income/#lesson","name":"Bonds for income: duration and the rate cushion","description":"As of Nov 10, 2026, a 1-point rise in rates would cut TLT's price by about 14.9%, against a year of income of 4.8%.","url":"https://etfiq.com/academy/building-wealth/bonds-for-income/","learningResourceType":"Lesson","teaches":"How bond price moves with rates (duration), what a year of income offsets (the rate cushion), and why a higher yield is not a better fund","educationalLevel":"Intermediate","timeRequired":"PT7M","inLanguage":"en","isAccessibleForFree":true,"isPartOf":{"@type":"Course","@id":"https://etfiq.com/academy/building-wealth/#course","name":"Building Wealth","url":"https://etfiq.com/academy/building-wealth/"},"position":5,"dateModified":"2026-11-10","author":{"@type":"Organization","name":"ETFIQ Research","url":"https://etfiq.com"},"publisher":{"@type":"Organization","name":"ETFIQ Research","url":"https://etfiq.com"}},{"@type":"FAQPage","@id":"https://etfiq.com/academy/building-wealth/bonds-for-income/#check","mainEntity":[{"@type":"Question","name":"A bond fund has a duration of 6 years. Rates rise 1 point. About what happens to its price?","acceptedAnswer":{"@type":"Answer","text":"It falls about 6%. price moves about duration \u00d7 the change, opposite to rates."}},{"@type":"Question","name":"A fund has a year of income of 4.2% and a duration of 6 years. What is its rate cushion?","acceptedAnswer":{"@type":"Answer","text":"0.7 points. 4.2 \u00f7 6 = 0.7, so a rise of more than 0.7 points in a year wipes out its income."}},{"@type":"Question","name":"On the IQ Bonds Score, Fund L (long duration) scores 40 and Fund S (short duration) scores 30. What can you say?","acceptedAnswer":{"@type":"Answer","text":"Each is ranked only against funds like it, so the scores don't compare the two directly. each score is a percentile inside its own set."}}]},{"@type":"BreadcrumbList","itemListElement":[{"@type":"ListItem","position":1,"name":"ETFIQ","item":"https://etfiq.com/"},{"@type":"ListItem","position":2,"name":"Academy","item":"https://etfiq.com/academy/"},{"@type":"ListItem","position":3,"name":"Building Wealth","item":"https://etfiq.com/academy/building-wealth/"},{"@type":"ListItem","position":4,"name":"Bonds for income","item":"https://etfiq.com/academy/building-wealth/bonds-for-income/"}]},{"@type":"WebPage","name":"Bonds for income: duration and the rate cushion","description":"Learn what duration means for a bond fund's price, and how far rates can rise before a year's income is gone, on three real Treasury ETFs.","url":"https://etfiq.com/academy/building-wealth/bonds-for-income/","dateModified":"2026-11-10","isPartOf":{"@type":"WebSite","name":"ETFIQ","url":"https://etfiq.com"},"speakable":{"@type":"SpeakableSpecification","cssSelector":[".lede"]},"publisher":{"@id":"https://etfiq.com/#org"}}],"characters":5912,"truncated":false,"content":"ETFIQ / Academy / Building Wealth / Bonds for income \n \n Bonds for income: duration and the rate cushion\n Data as of Nov 10, 2026. Rebuilt every trading night.\n As of Nov 10, 2026 , a 1-point rise in rates would cut TLT's price by about 14.9% , against a year of income of 4.8% .\n Building Wealth \u00b7 Lesson 5 of 6 1 2 3 4 5 6 \n Pick an amount. See what a 1-point rise in rates costs each fund, and what a year of income pays. Amount you put in $10,000 On $10,000: SHY price, rates +1 \u2212$181, SHY a year of income $360, IEF price, rates +1 \u2212$683, IEF a year of income $406, TLT price, rates +1 \u2212$1,490, TLT a year of income $477. Hypothetical amount and a hypothetical 1-point rise in rates. Durations as of Nov 10, 2026; income is the year to Nov 10, 2026. \n The question\n \"Bond funds pay steady income, so they're safe, right? Why did my bond fund lose money this year?\"\n The idea\n A bond is a loan that pays fixed interest. When interest rates rise, new bonds pay more, so older bonds paying less are worth less. Bond prices fall when rates rise, and rise when rates fall. \n How much a fund's price moves is measured by duration , in years. A 1-point rise in rates cuts the price by about the duration, in percent. A fund with a duration of 7 years drops about 7%. Longer loans mean a longer duration and bigger swings, in both directions.\n Income softens the blow. ETFIQ's rate cushion divides a year of income by duration. It answers one question: how far can rates rise in a year before that year's income is gone? \n Worked example\n Three iShares Treasury funds: same borrower, the US government, different loan lengths.\n SHY (1 to 3 years) IEF (7 to 10 years) TLT (20+ years) \n Duration 1.81 years 6.83 years 14.90 years \n A year of income (yield) 3.60% 4.06% 4.77% \n Rate cushion 1.99 points 0.59 points 0.32 points \n Durations are the issuer's, read Nov 9, 2026 . Income is the year to Nov 10, 2026 .\n Step 1. What a 1-point rise does to $10,000 in TLT: $10,000 \u00d7 14.90% = about $1,490 off the price.\n Step 2. A year of TLT's income: $10,000 \u00d7 4.77% = $477 , about a third of that fall.\n Step 3. The cushion: 4.77 \u00f7 14.90 = 0.32 points . If rates rise by more than about a third of a point in a year, TLT's price fall eats the whole year's income.\n Step 4. SHY: 3.60 \u00f7 1.81 = 1.99 points . Rates would need to rise almost 2 points before SHY's year of income was gone.\n What actually happened. Over the year to Nov 10, 2026 , all three prices fell , roughly in step with duration:\n SHY: price \u22121.8% , total return +1.8% \n IEF: price \u22125.7% , total return \u22121.9% \n TLT: price \u22129.7% , total return \u22125.4% \n Only SHY's income outran its price fall. Then, in the month to Nov 10, 2026 , the moves flipped: TLT +4.2% , IEF +2.1% , SHY +0.5% . Duration works both ways.\n The common mistake\n \"A higher yield means more income, so it's the better bond fund.\" TLT's yield was the highest of the three, and it returned the least over the year. A higher yield often comes with a longer duration, which means a smaller cushion.\n The second mistake is comparing scores across sets. ETFIQ's IQ Bonds Score ranks a fund's rate cushion only against similar funds, and 100 is best. TLT scored 36.7 among 15 long government funds; IEF scored 8.3 among 24 intermediate ones. Each score says only where a fund ranks in its own set. It does not say which fund's cushion is bigger: compare the cushions themselves.\n Check your understanding\n Pick an answer to see why. Two of three right passes the lesson.\n 1. A bond fund has a duration of 6 years. Rates rise 1 point. About what happens to its price? A It rises about 6% B It falls about 1% C It falls about 6% D It doesn't change Answer: C. It falls about 6%. price moves about duration \u00d7 the change, opposite to rates. Not B: that ignores duration; 1% is the rate change, not the price change. 2. A fund has a year of income of 4.2% and a duration of 6 years. What is its rate cushion? A 0.7 points B 1.8 points C 25 points D 10.2 points Answer: A. 0.7 points. 4.2 \u00f7 6 = 0.7, so a rise of more than 0.7 points in a year wipes out its income. Not D: the cushion divides, it doesn't add. 3. On the IQ Bonds Score, Fund L (long duration) scores 40 and Fund S (short duration) scores 30. What can you say? A L has the bigger rate cushion B Both have the same cushion C S is riskier D Each is ranked only against funds like it, so the scores don't compare the two directly Answer: D. Each is ranked only against funds like it, so the scores don't compare the two directly. each score is a percentile inside its own set. Not A: TLT outscored IEF while holding about half IEF's cushion. \n Takeaways\n Duration tells you the price move: about duration percent for each point rates change. \n Divide a year of income by duration to see how big a rate rise it can absorb. \n Compare bond scores only within the same set. \n Do it on ETFIQ\n Find your bond fund's duration and rate cushion \n Where to next\n Next lesson: Retirement withdrawals: a 4% draw in a bad year Previous lesson: Taxable or tax-advantaged: where payouts get taxed Building Wealth: all lessons The explainer behind this lesson ETFIQ Academy How ETFIQ computes these numbers \n Cite this page. ETFIQ, Bonds for income: duration and the rate cushion, data as of Nov 10, 2026. https://etfiq.com/academy/building-wealth/bonds-for-income/ Free to use with attribution for data ETFIQ computes; issuer data stays under its owner's terms. The underlying files are at Open data .\n Other forms Plain ETFIQ, Bonds for income: duration and the rate cushion, data as of Nov 10, 2026. https://etfiq.com/academy/building-wealth/bonds-for-income/ APA ETFIQ. (Nov 10, 2026). Bonds for income: duration and the rate cushion. Retrieved from https://etfiq.com/academy/building-wealth/bonds-for-income/ Markdown [Bonds for income: duration and the rate cushion (ETFIQ, Nov 10, 2026)](https://etfiq.com/academy/building-wealth/bonds-for-income/)","source":"ETFIQ, independent ETF data. Recomputed nightly from public filings and prices.","publisher":{"@id":"https://etfiq.com/#org","name":"ETFIQ","url":"https://etfiq.com"},"license":"https://etfiq.com/license/","license_text":"Data ETFIQ computes is free to use with attribution: ETFIQ (etfiq.com). Issuer data stays under its owner's terms.","citation":"ETFIQ, Bonds for income: duration and the rate cushion, data as of Nov 10, 2026. https://etfiq.com/academy/building-wealth/bonds-for-income/"}