The idea
A bond ladder spreads money across bonds that mature in successive years, for example one, two, three, four and five years. Each year one rung matures; the money can be spent or reinvested at the long end of the ladder.
Why investors use ladders
- Predictable cash flows from coupons and maturities.
- Less exposure to the interest-rate level on any single date.
- Less need to sell bonds before maturity, reducing liquidity risk.
Things to keep in mind
- Diversify issuers as well as maturities, so a single default does not wipe out a rung.
- Callable bonds can break the ladder by repaying early.
- In a foreign currency, the ladder still carries currency risk.
- Large minimum denominations make Eurobond ladders practical mainly for larger portfolios; funds with defined maturity dates are an alternative.
This is general education, not a recommendation. Whether a ladder suits you depends on your circumstances.