Duration measures how sensitive a bond's price is to interest rates. A modified duration of 4 means the price falls about 4% if yields rise by one percentage point, and rises about 4% if yields fall by one point.
Macaulay duration is the weighted average time, in years, until you receive the bond's payments. Longer maturities and lower coupons mean longer duration. A zero coupon bond's duration equals its maturity.
Duration matters if you may sell before maturity. If you hold to maturity and the issuer pays in full, price changes in between do not affect what you receive.
Related
Related terms: Yield to maturity (YTM) · Zero coupon bond · Floating rate bond
Before investing, look up the issuer: all its outstanding bonds, rating history and disclosure documents.
This page is for information only. It is not investment advice, a credit rating or a recommendation to buy, sell or hold any security. Facts are taken from the issuer's own documents and the sources linked on this page; check them with the source before investing.
