Interest-rate risk
Also called: rate risk, duration risk
The risk that a bond or debt fund falls in value because interest rates rise.
When market rates rise, existing fixed payments become less valuable, so prices fall. The longer the time to maturity, the larger the effect. Investors who hold a bond to maturity still receive the promised payments if the issuer pays.
Learn more in these lessons
- Equity and fixed incomeHow do bonds, deposits and debt funds differ from shares, and can they lose money?
- REITs and InvITsWhat are REITs and InvITs, and how risky are their distributions?
- Interest ratesWhy do interest rates matter so much for companies and share prices?
- Bonds and bond yieldsWhy do bond prices fall when yields rise, and what return does a bond really give?
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