Interest Rate Risk for Bond Beginners
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Interest Rate Risk for Bond Beginners
By Ahmad Dogar
FitCreeper Finance · Educational only
AI-assisted draft checked against the SEC Investor.gov bulletin and TreasuryDirect on 2026-10-03.
What interest-rate risk means
Interest-rate risk is the possibility that a fixed-rate bond or bond fund loses market value when market rates rise. The basic relationship is that prices of existing fixed-rate bonds generally fall when new rates rise; prices may rise when rates fall.
Simple example
A fixed-rate bond paying a lower coupon may be less attractive after new bonds offer higher rates. Its market price can adjust. Selling before maturity may produce more or less than face value.
Bond funds
Bond funds can lose value when rates rise, and funds holding longer-maturity bonds are typically more sensitive. Most funds do not have a single maturity date. Interest-rate risk is not the same as credit risk or inflation risk.
FAQ
What happens when rates rise?
Existing fixed-rate bond prices generally fall.
Can Treasury prices change?
Yes, especially before maturity if sold in the market.
Are bond funds immune?
No. Funds have interest-rate risk and often no single maturity date.
Is this investment advice?
No—educational only.