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The PCA analysis does not really tell you what the bonds do but it tells you how the rates move together. The variations of $n$ rates (i.e. 1 y, 2y, ...) are split up in (at first) abstract factors like $$ \Delta R_i = \sum_{j=1}^n e_{i,j} f_j $$ where $\Delta R_i$ is the change in the rate $i$ and $f_j$ is factor $j$ and $e_{i,j}$ is the (factor loading=) ...


PCA(Principal Component Analysis) is the most interesting topic in QF. PCA is at the heart of quantitative data analysis. It is used in factor analysis, factor loadings, finding principal component of interest rate term structure for derivative and option pricing, data compression, eigenfaces( find the best match from a set of pictures with a , say, fuzzy ...

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