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Understanding the Relationship Between Bonds and Interest Rates

Updated: May 10



In the financial realm, there's an inverse relationship between bond prices and interest rates, meaning that when interest rates rise, bond prices typically decline, and vice versa. This relationship highlights how sensitive bonds can be to changes in interest rates, with longer-term bonds generally more affected than shorter-term bonds. Understanding these dynamics is crucial for investors looking to navigate the complexities of the bond market effectively. This knowledge can help mitigate the intimidation often associated with fluctuating interest rates and their impact on investment portfolios.



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