Bond yields and bond prices move in opposite directions, but maturity determines how strongly prices react. This investor education guide explains the relationship between coupon, yield and secondary-market price, why longer-duration bonds are more sensitive to interest-rate changes, and how investors can think about maturity selection across different stages of the interest-rate cycle.
EMPIRE CAPITAL RESEARCH
Bond Yields, Bond Prices
& Maturity
An Investor's Guide to Interest-Rate Risk, Duration and Reinvestment Risk
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THE CORE RELATIONSHIP |
Market Yield ↑ → Existing Bond Price ↓ |
Market Yield ↓ → Existing Bond Price ↑ |
Investor Education Series
Fixed Income | Duration | Secondary-Market Pricing
Disclaimer: Educational and informational material only. Not investment advice.
1. Coupon, Yield and Price: Three Different Concepts
A rise in market bond yields does not increase the coupon payment on an existing fixed-rate bond. The coupon is contractual and remains unchanged. Instead, the bond’s secondary-market price adjusts so that a new buyer can…
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