How Interest Rate Changes Affect the Price of Bonds
Whether the interest rate movements are caused by Federal Reserve actions, economic conditions or inflation fears, the impact on the bond investor is the same: Rising interest rates reduce existing bond values and falling interest rates increase existing bond values.
Seems simple enough.
Share this article
But how will your bond investments be affected by changes in interest rates?
Since bonds differ by maturity, coupon rate, type of issuer and other factors, figuring out how your bond or bond portfolio will be affected by interest rate changes can be complex. Fortunately, you don't need a math degree to understand the basic concepts. Here are some simple guidelines for judging the price volatility of your bonds.
To read more, please become an AAII member or CLICK HERE.