Treasury Prices and Yields Move in Opposite Directions
For an existing fixed-rate Treasury security, a higher market yield requires a lower price and a lower market yield requires a higher price, all else equal.
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Longer Maturity Usually Means Greater Interest-Rate Sensitivity
A long-dated fixed-rate bond generally has more price sensitivity to a change in market rates than an otherwise similar short-dated bond.
What it is
Interest-rate risk is the risk that a fixed-rate bond’s market price changes when market interest rates change. Maturity and coupon structure are important determinants of that sensitivity.
Why it matters
Two Treasury yields can move by the same number of basis points while producing very different price changes across short- and long-maturity securities.
Example
A long-term fixed-rate Treasury generally experiences a larger percentage price response to a given rate move than a similar short-term Treasury.
Common mistake
Assuming that a one-percentage-point yield change implies the same price effect at every maturity.
What to watch
- remaining maturity
- coupon rate
- market yield
- price sensitivity
- yield-curve segment
Key takeaway
Rate moves must be interpreted together with maturity and cash-flow structure when assessing bond-price sensitivity.
Adaptive review
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Related cards
Sources
U.S. Securities and Exchange Commission · U.S. Treasury
Educational and informational purposes only. Not investment advice.