Bond Duration Explained: How Much a Rate Move Can Hurt

Interest rate risk is the central risk in bonds, and duration is how it's measured. The word sounds technical, but the idea fits in one sentence: duration estimates how much a bond's price will change when interest rates move. This is Part 4 of our Bonds, Explained series.

The rule of thumb

FINRA defines bond duration as a measure of the degree to which a bond investment is likely to change in value if interest rates rise or fall. The rule of thumb: generally speaking, for every 1 percentage-point change in interest rates, a bond will rise or fall in the opposite direction by an amount equal to its duration number. FINRA's example: a bond with a duration of 10, when interest rates rise by 1 percentage point, would be expected to decline by approximately 10 percent.

It runs in both directions. If rates fall by a point, a bond with a duration of 10 would be expected to rise about 10%. And it's an approximation: it works best for small moves, and real results can differ.

What drives duration

Duration isn't the same as maturity, but they're related. The SEC's investor bulletin on interest rate risk gives two guideposts: bonds with longer maturities generally have higher interest rate risk, and bonds offering lower coupon rates generally have higher interest rate risk.

• Longer maturity, longer duration. Money tied up longer is more exposed to rate changes. A 30-year bond is far more sensitive than a 6-month bill.
• Lower coupon, longer duration. A bond that pays you less each year gets more of its value from the distant final payment, and distant payments are more affected by rate changes.
• Duration changes over time. As a bond ages toward maturity, its duration shrinks.

Why it matters right now

In October 2026, the Treasury's par yield curve showed the 30-year at 5.60% on October 8, after closing at 5.67% the day before. A one-day move of 0.07 percentage points is worth only about 1% to a bond with a duration of 15 under the rule of thumb, but a full point over a few months would be worth about 15%. A 3-month bill paying 4.23% barely moves at all.

Bond funds have duration too

A bond fund doesn't mature, and its duration is an average across its holdings. FINRA notes an important distinction: owning an individual bond is not the same as owning a fund that owns bonds. A bondholder is promised fixed payments and face value at maturity. A fund owns many bonds with different rates and maturities, and rising rates can reduce its value. Before buying a bond fund, check its duration on the fact sheet, which we cover in our guide to reading a fund fact sheet.

Common questions

What is bond duration?

Duration is a measure of how much a bond's price is likely to change when interest rates move. FINRA's rule of thumb is that for each 1 percentage-point change in rates, the price moves in the opposite direction by roughly the duration number, in percent.

Is duration the same as maturity?

No. Maturity is the date the bond repays its principal. Duration is a sensitivity measure that also reflects the coupon and timing of payments. They're related, since longer maturities usually mean longer duration, but they aren't the same number.

Do short-term bonds have less interest rate risk?

Generally, yes. Bonds with shorter maturities and higher coupons tend to have shorter durations and are less sensitive to rate changes, though they may also offer lower yields.