QUICK DEFINITION
Interest-Rate Risk is the risk that a bond's market value changes because prevailing interest rates or required yields move.
WHY IT MATTERS
Why Interest-Rate Risk matters in bond markets
The longer the duration, the larger the price impact of a given yield change, all else equal.
MARKET CONTEXT
How to think about it
Bond investors use interest-rate risk as part of a wider framework that links prices, yields, cash flows, liquidity and risk. The concept should therefore be read together with its related terms rather than as an isolated definition.
Is Interest-Rate Risk important for fixed-income investors?
← Back to the Bond Market Glossary Yes. The longer the duration, the larger the price impact of a given yield change, all else equal.