What it means
If the yield curve is positively sloped, a 10-year bond trading at 4.5% becomes a 9-year bond as time passes - and 9-year yields might be 4.3%. Rolldown is the price gain from re-pricing at the lower yield, on top of the coupon income.
Why it matters
Rolldown is a major component of fixed-income returns and is often overlooked. In steeply positive curves, rolldown can match or exceed coupon income.
How to use it
When choosing a bond maturity, calculate expected return = coupon + rolldown. The 'belly' (5-7y) often offers the best risk-adjusted total return for this reason.
Take it further
Want a worked example or a deeper dive? Ask Rocky how this concept applies to your specific watchlist or trade idea.
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