When interest rates rise, bond prices typically fall. This is the core inverse relationship between rates and prices in fixed income markets. Key points

• Price and yield move in opposite directions: as rates go up, existing bonds with lower coupons become less attractive, so their prices decrease and their yields rise to be competitive with new issues.

• The magnitude of the price drop depends on duration: bonds with longer maturities (greater duration) are more sensitive to rate changes, so they tend to experience larger price declines when rates rise.

• Coupon rate matters: lower-coupon bonds generally exhibit greater price sensitivity to rate moves than higher-coupon bonds for the same maturity.

• Shorter-term investors may experience less price risk if they can hold to maturity, since principal at maturity is repaid and may mitigate some price fluctuations in the interim.

• Yields adjust through price changes: as prices fall, the current yield and yield to maturity increase, making existing issues more competitive with new higher-yield bonds.

If you’d like, I can tailor this to a specific bond profile (maturity, coupon, and credit quality) and illustrate approximate price moves using a hypothetical rate change.