Bond Ladder Builder · Baratelli Institute

Ladder configuration

Total capital, ladder length, and bond type drive everything else.

Total capital to deploy

Post-tax cash you want laddered. Typical post-liquidity-event allocation: 10-30% of net proceeds to fixed income.

Ladder length

Equal-spaced rungs from 1 year out to the ladder length. Avg duration = ~half the ladder length.

Bond type

Average yield across ladder (%)

Use the mid-curve yield for your bond type. The tool extrapolates a mild upward slope across rungs (short rungs slightly lower, long rungs slightly higher).

Marginal federal tax rate (%)

Marginal state + local tax rate (%)

Your ladder

LADDER SUMMARY

Build to see your ladder.

Total deployed

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Equal-weight across rungs.

Annual income (pre-tax)

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Sum of all rung coupons.

After-tax annual income

—

What you actually keep.

Average duration

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Roughly half the ladder length.

Rung-by-rung schedule

Each rung is equally sized in face value. Yield assumed to slope mildly upward across the ladder (short rungs slightly below average, long rungs slightly above) — the typical Treasury curve shape.

REINVESTMENT CADENCE

What happens as each rung matures

The discipline is what makes a ladder work. Each year, one rung matures and the proceeds are immediately reinvested in a new bond at the long end of the ladder (year N).

Year 1: The 1-year rung matures. Roll proceeds into a new -year bond at then-prevailing rates.
Year 2: The original 2-year rung matures (now in its 1st-year position). Roll again to long end.
Years 3 through : Same pattern. Each year, one rung matures, one new rung added.
Steady state: Ladder duration stays constant. Income smooths through rate cycles (rolling rungs reprice at current yields). The portfolio survives Fed tightening because only one rung repaths each year.

The discipline trap. The temptation in falling-rate environments is to "stretch for yield" by buying a longer-duration bond outside the ladder structure. Don't. The whole point of the ladder is rate-cycle smoothing — the discipline is the alpha.

PRACTICAL READING

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Show the math — ladder structure, yield slope, after-tax computation ›

Ladder structure. Equal capital allocated to each rung. With N-year ladder and total capital C:

Capital per rung = C / N

Rung 1 matures in 1 year, Rung 2 in 2 years, …, Rung N in N years.

Yield curve slope. The tool assumes a mild upward slope: shortest rung yields (avg_yield − 0.25%), longest rung yields (avg_yield + 0.35%). Linear interpolation in between. This roughly matches a normal Treasury curve. In an inverted-curve environment (2023-2024) the shape would flip; in extreme inversion, very short rungs can yield more than long rungs — the tool does not model that case (use the Bond Yield Calculator for individual-bond precision).

Annual income. Sum of (rung capital × rung yield) for all N rungs.

Annual income = Sum [r=1..N] (C/N) × y_r

Where y_r is the yield on rung r.

After-tax income depends on bond type:

Treasury: interest is taxable at federal but exempt from state and local (31 USC 3124). After-tax rate = (1 − fed).
Muni in-state: tax-free at federal and state (excluding AMT exposure on private-activity bonds). After-tax rate = 1.0.
Muni out-of-state: tax-free at federal only; state-taxable. After-tax rate = (1 − state).
Corporate: taxable at both federal and state. After-tax rate = (1 − fed − state).

Average duration of an equal-weight ladder is approximately (N + 1) / 2 years. For a 10-year ladder, average duration is ~5.5 years — meaningfully less than holding a single 10-year bond. That is the rate-risk smoothing benefit.

Why not buy a bond fund? A bond fund has perpetual duration (no maturity), an expense ratio (10-50 bps), and NAV volatility from continuous mark-to-market. A ladder has a defined maturity for each rung, zero expense ratio, and book-value income visibility. For investors who can hold to maturity, the ladder usually wins.

FREE DOWNLOADS · BLOOMBERG-PARITY WORKBOOK + METHODOLOGY

Take the full workbook and methodology PDF

Bond Ladder Workbook (.xlsx) — Single-ladder builder for Treasury/Muni/Corporate; portfolio compare of up to three ladders side-by-side; year-by-year cash-flow & reinvestment schedule; reference glossary & disclosures. Free.
Download the workbook
Methodology PDF (16 pp) — Full derivations for ladder construction, the (N+1)/2 duration result, reinvestment discipline, ladder-vs-fund and ladder-vs-bullet comparisons, Treasury/Muni/Corporate tax mechanics, and when ladders don't work. Excel formula reference. Sources.
Open the methodology PDF

DIG DEEPER · INSTITUTE FIXED-INCOME & LIQUIDITY TOOLS

Related tools & guides

Compute the yield on each candidate rung before buying → Bond Yield Calculator (YTM / YTC / After-Tax)
Understand interest-rate sensitivity at the rung level → Bond Duration & Convexity Calculator
Compare a muni rung to a Treasury rung on an after-tax basis → After-Tax Municipal Bond Yield
Post-liquidity-event allocation to fixed income → Liquidity Event Decision Simulator — sell-now vs hold with tax sequencing.
Full Family Office Reference framework → Family Office Reference — fixed-income allocation by purpose (operating reserve, liability matching, generational hold).

Disclosure. This tool produces an educational planning estimate. Real-world bond purchases have bid-ask spreads (~5-25 bps for retail Treasuries, larger for munis and corporates), settlement-date conventions, callable provisions on most muni and corporate issues, credit risk on non-Treasury bonds, and reinvestment-rate risk that the steady-state model glosses over. AMT applies to certain private-activity municipal bonds. State residency determines in-state-muni eligibility. This is not investment advice. Consult a fixed-income specialist for bond selection, and a CPA for state-specific tax treatment. The Baratelli Institute does not sell bonds. baratelliinstitute.com

Build a bond ladder — predictable income, smoothed rate risk, no manager fee.

Ladder configuration

Your ladder

Rung-by-rung schedule

Same subject. Four levels of depth.

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