On “Negative Bond Duration”

Negative Duration Bonds

Courtesy: www.CertifiedMedicalPlanner.org

WHAT IT IS – HOW IT WORKS?

Bond duration is a measure of the volatility of a bond’s return over time. It measures the price reduction of a bond, over the change in interest rate of the bond. It is slightly correlated to how long it takes for the bond to mature, but it is not an exact relationship.

ESSAY: https://medicalexecutivepost.com/2008/10/20/understanding-bond-duration/

But, “negative duration” is a situation in which the price of a bond or other debt security moves in the same direction of interest rates. That is, negative duration occurs when the bond prices go up along with interest rates and vice versa.

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See the source image

https://www.etf.com/sections/features/20920-how-a-negative-duration-bond-etf-works.html?nopaging=1

ASSESSMENT

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