Interest Rate Sensitivity

Interest-rate sensitivity measures how the price of a bond changes with changes to underlying interest rates. Bonds that are more sensitive to changes in interest rates will exhibit bigger price moves for the same change in yield. Bond prices move inversely to interest rates. A bond’s duration (cf.) is a measure of how its price changes for changes in underlying interest rates. The higher the duration of a bond, the more its price will fall when interest rates rise and vice versa.