SEP · ISSUE 36 · September 3, 2026
CONCEPTWhy the 30-year bond falls more than the 2-year
Two bonds from the same issuer, the same rate hike, very different losses. The key is called duration.
SHORT TERM
2 years
barely sensitive
LONG TERM
30 years
very sensitive
KEY
duration
not just maturity
THE IDEA
duration
price sensitivity to rates
Duration measures how much a bond's price moves when rates change. A 30-year bond has far more duration than a 2-year, so the same rate hike does far more damage.
RULE
SIMPLE RULE10x
10x
how much more the long bond falls vs the short
It isn't that the 30-year bond is worse. It's that it commits your money for far longer, and time amplifies every move in rates.
For the same rate hike, a 30-year bond can lose roughly ten times more price than a 2-year one.
- PRICE
- — What the bond is worth in the market today, distinct from its face value.
- FACE VALUE
- — The principal the bond repays at maturity.
KEY IDEA
TO GET ITTime amplifies rate risk
“A long bond isn't riskier on a whim: it promises to repay you far in the future, and that multiplies its sensitivity to rates.”
A bond is a promise of future payments. The further away those payments are, the more today's rate weighs on its price.
- CASH FLOW
- — Each payment you will receive from a bond in the future.
- DISCOUNT RATE
- — The rate used to value a future payment today.
- SENSITIVITY
- — How much the price reacts to a change in rates.
EXAMPLE
HYPOTHETICALHow much the price falls if rates rise 1%
Rounded figures to illustrate the idea. The short end barely flinches; the long end takes almost the whole hit.
Illustrative example: the longer the maturity, the bigger the price drop for the same one-point rise in rates.
- POINT
- — A 1% rise or fall in the interest rate.
- DURATION
- — Measures how much maturity amplifies the rate effect.
IMPLICATIONS
WHAT TO LEARNFour ideas that change how you see a bond
MORE MATURITY, MORE SENSITIVE
Duration grows with maturity. That's why the 30-year bond is a rollercoaster next to the 2-year.
IT WORKS BOTH WAYS
If rates fall, the long bond gains far more than the short. Duration amplifies losses and gains alike.
THE COUPON CUSHIONS
A bond with high coupons returns your money sooner, so its duration is a bit lower at the same maturity.
IT'S NOT MATURITY ALONE
Duration blends maturity, coupon and payment frequency. That's why two bonds at the same maturity can fall differently.
Understanding duration avoids surprises: two similar-looking bonds can behave in opposite ways.
- COUPON
- — The periodic interest a bond pays before maturity.
- MATURITY
- — The date a bond repays the principal to the investor.
- DURATION
- — Price sensitivity to rates, expressed in years.
COMPOSITION
WHAT SETS ITWhat makes a bond more or less sensitive
The dominant driver of duration
High coupons lower the duration
Paying more often lowers it a little
Illustrative split. Maturity rules, but the coupon and frequency fine-tune how much the price moves.
Duration doesn't depend on maturity alone: the coupon and payment frequency matter too.
- COUPON
- — The periodic interest a bond pays its holder.
- MATURITY
- — When the bond's principal is repaid.
EXAMPLES
REPRESENTATIVEBond funds ranked by duration
| SHY | 82 | ▼ -0.3% | 1-3 year bonds. Short duration: barely moves when rates rise. |
| IEF | 92 | ▼ -0.8% | 7-10 year bonds. Medium duration: falls more than the short end. |
| TLT | 86 | ▼ -2.0% | 20+ year bonds. Long duration: the most sensitive of all. |
| BND | 72 | ▼ -0.7% | US aggregate bond. A blend of maturities, intermediate duration. |
| TIP | 108 | ▼ -0.4% | Inflation-linked. They have duration too: they suffer if real rates rise. |
Representative examples, with approximate figures: notice how, the longer the duration, the bigger the hit would be from a rate hike.
- ETF
- — An exchange-traded fund that tracks a basket of bonds.
- AGGREGATE
- — An index blending bonds across many maturities and issuers.
- REAL RATE
- — The interest rate once inflation is stripped out.
WRAP-UP
FOLLOWIs duration clear now?
If you now see why the long bond is a rollercoaster, share it with anyone who buys fixed income.
One concept a day, no jargon. Tomorrow, another piece of the puzzle.
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- DURATION
- — How sensitive a bond's price is to interest rates.
- FIXED INCOME
- — Bonds and debt that pay a set rate of interest.