SHORT ANSWER
The core idea
Reinvestment risk is the possibility that coupons or returned principal must be reinvested at lower rates than were previously available.
THE MECHANISM
What is happening underneath
It is particularly relevant when yields fall or when a callable bond is redeemed early.
MARKET INTERPRETATION
How investors should read it
A high coupon provides more interim cash flow but also creates more cash that must be reinvested.
BONDSTATS TAKEAWAY
The same market move can carry different information depending on which maturity, issuer and risk premium is changing. Read the question together with the underlying concepts rather than treating one price move as a universal signal.
RELATED CONCEPTS
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