The Inverse Relationship Between Interest Rates and Bond Prices

Investopedia | Jun 14, 2019 at 5:45 AM
  • If current interest rates were to rise, giving newly issued bonds a yield of 10%, then the zero-coupon bond yielding 5.26% would not only be less attractive, it wouldn’t be in demand at all.
  • Newly issued bonds tend to have coupon rates that match or exceed the current national interest rate.
  • For this reason, when the Federal Reserve increased interest rates in March 2017 by a quarter percentage point, the bond market fell.