Investing · General financial education

Bond duration

Duration measures how much a bond price is likely to move when interest rates rise or fall. A higher number means more sensitivity to rates.

In more detail

FINRA describes the usual approximation this way: if rates move by one percentage point, the price moves the other way by about the duration number in percent. Their example: duration 10 and rates up one percentage point, then an expected price decline of about 10 percent. Longer maturity tends to raise duration, and a higher coupon tends to lower it. This is an estimate, not a promise.

Background

Read next to bonds, interest and swings: low duration is not the same as low risk. The issuer, the coupon and when you might sell stay separate questions. Finmon names no bond.

An example

Two bonds, duration 2 and duration 8. If market rates rise, the FINRA approximation expects the larger price drop on the higher measure. The number does not say whether you hold or sell.

A common misconception

Duration is the maturity in years and therefore the whole risk description.

FINRA uses duration as price sensitivity to rate changes. Maturity feeds in, but it does not replace the coupon or the issuer.

Source: FINRA · Duration. Last reviewed: 2026-10-31. Editorially reviewed on 2026-10-31. Next review 2027-10-31. Version 0.2.0. Finmon explains. It does not advise. Not investment, tax or legal advice.