Glossary · Bonds and rates
Duration
Duration measures how much a bond’s price moves when interest rates change: a duration of 8 means about 8% for each 1-point move in rates.
Also called: modified duration, Macaulay duration, bond duration, interest rate risk
At 4.98% (November 10, 2026). A 1-point rise in rates would cut its price by about 7.4%.
A 1-point rise in rates: about 13.3% lower.
A 1-point rise in rates: about 1.9% lower.
In plain words
Picture a seesaw. Interest rates sit on one end and bond prices on the other: when rates go up, prices go down. Duration tells you how long the bond’s end of the seesaw is, and so how far its price swings for a given move in rates.
It is measured in years, and the rule of thumb is simple: a bond with a duration of 8 loses about 8% of its price if rates rise by 1 percentage point, and gains about 8% if they fall by 1 point. A new 10-year Treasury today has a duration of about 7.8 years.
Two things make duration long: a distant maturity and a small coupon. A 2-year bond barely moves; a 30-year bond can move a lot. A zero-coupon bond is the most sensitive of all for its maturity.
Example
A 1-point rise in rates, three bonds
Three new Treasuries bought at face value today; the next day every yield rises by 1 point.
- 2-year note at 4.73%: its price falls about 1.9%.
- 10-year note at 4.98%: it falls about 7.4%.
- 30-year bond at 5.35%: it falls about 13.3%.
Same move in rates, very different losses. The extra yield of long bonds is pay for carrying that risk.
One level deeper
The idea goes back to the economist Frederick Macaulay in 1938: the average time you wait for your money, each payment weighted by its present value. That Macaulay duration, divided by (1 + the yield per period), gives the modified duration: the percent price change for a 1-point change in yield.
Duration is a straight-line estimate, and bond prices curve. For big moves, prices rise a little more than duration predicts when rates fall, and fall a little less when rates rise. That bend is called convexity, and it is why the exact losses in the example are slightly smaller than duration alone suggests.
Bond funds publish an average duration: a fund with a duration of 6 would be expected to lose about 6% if rates jumped 1 point overnight. When rates rise fast, long-duration funds lose far more than short ones. In 2022, the worst year in our data, even 10-year Treasuries returned −15.0% including interest.
How much Treasuries lose if rates rise 1 point
New Treasuries of six maturities, each bought at face value at its latest yield (November 10, 2026), then repriced after a 1-point rise. The loss grows with maturity, but not in a straight line.
The numbers behind the chart
| Price fall for a 1-point rise | |
|---|---|
| 1 year | 1.0% |
| 2 years | 1.9% |
| 5 years | 4.3% |
| 10 years | 7.5% |
| 20 years | 11.2% |
| 30 years | 13.3% |
Why it matters
It sums up the interest-rate risk of a bond or a bond fund in one number.
It explains why “safe” long-term government bonds can lose as much as stocks in a bad year for rates.
Pension funds and insurers match the duration of their bonds to the duration of what they owe, so a move in rates hits both sides about equally.
A common mistake
Myth: Duration is just another word for maturity.
In fact: Both are in years, but they measure different things. A 10-year bond that pays coupons has a duration well under 10, because part of your money comes back early as interest. Only for a zero-coupon bond does the Macaulay duration equal the maturity.
Questions people ask
What is a good duration for a bond fund?
It depends on how long the money can wait. Short-term funds (duration 1 to 3) barely move with rates; long-term funds (duration 15 or more) can swing like stocks. Many investors match the duration to when they will need the money.
How do you calculate duration?
Macaulay duration adds up the time of each payment, weighted by its share of the bond’s present value. Divide it by (1 + the yield per period) for the modified duration. A new 10-year Treasury at 4.98% has a modified duration of about 7.8 years.
Does duration work when rates fall too?
Yes, in the other direction: if rates fell 1 point, a new 10-year Treasury would gain about 8.2%. Gains are slightly bigger than losses for the same move, thanks to convexity.
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About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- US 10-year Treasury bonds, total return index: Robert J. Shiller, Online Data (shillerdata.com), ie_data.xls, sheet "Data": "Long Interest Rate GS10", checked against "Monthly Total Bond Returns" and "Real Total Bond Returns".
- US Treasury par yield curve rates: U.S. Department of the Treasury, Daily Treasury Par Yield Curve Rates (Interest Rate Statistics).
- Durations and price changes are worked out for a bond that pays its yield as a coupon twice a year and is bought at face value; real Treasuries’ coupons differ slightly.
- This page explains a term. It is not investment advice.