By watching the yield curve, as reported in the daily financial press, you can gain a sense of where the market perceives interest rates to be headed-one of the important factors that could affect your bonds' prices. That is as it should be, since the longer the investor's money is at risk, the more the investor should expect to earn. This means that the reward for extending maturities is relatively small, and some investors will choose to stay in the short end of the maturity range. This suggests that investors' expect interest rates to decline. An inverted yield curve is sometimes considered to be a harbinger of recession.
Some bonds offer special tax advantages.
There is no state or local income tax on the interest from U.S. Treasury bonds, and no federal income tax on the interest from most municipal bonds, and in many cases no state or local income tax, either. Your investment advisor can provide you with a chart showing how much taxable income you would need at each income tax bracket to match the return from a tax-exempt security. Assessing Risk Virtually all investments have some degree of risk. When investing in bonds, it's important to remember that an investment's return is linked to its risk. The higher the return, the higher the risk.