Robeco logo

Disclaimer

The information contained in the website is solely intended for professional investors. Some funds shown on this website fall outside the scope of the Dutch Act on the Financial Supervision (Wet op het financieel toezicht) and therefore do not (need to) have a license from the Authority for the Financial Markets (AFM).

The funds shown on this website may not be available in your country. Please select your country website (top right corner) to view more information.

Neither information nor any opinion expressed on the website constitutes a solicitation, an offer or a recommendation to buy, sell or dispose of any investment, to engage in any other transaction or to provide any investment advice or service. An investment in a Robeco product should only be made after reading the related legal documents such as management regulations, prospectuses, annual and semi-annual reports, which can be all be obtained free of charge at this website and at the Robeco offices in each country where Robeco has a presence.

By clicking Proceed I confirm that I am a professional investor and that I have read, understood and accept the terms of use for this website.

Decline

Fixed income

Bond duration

Duration refers to the price sensitivity of a bond, or a portfolio of bonds, to a change in interest rates. It is measured in years. The higher the duration, the greater the responsiveness of the bond price – or the value of a bond portfolio – to a change in interest rates. There is an inverse relationship between bond prices and interest rates. Expressed differently: the higher the duration of an asset or a portfolio of assets, the higher its interest rate risk.


Defining sensitivity

Typically, for every year of modified duration, a 100 basis point increase (decrease) in interest rates would result in the price of a bond declining (increasing) by about 1%. Thus, for a bond with a duration of 7 years, if interest rates were to increase by 100 basis points, the price of the bond would drop by 7% (that is, 7 years multiplied by 100 basis points).

Duration is affected by the size and timing of future payments on a bond. For example, the longer the maturity of the bond or the bond portfolio, the higher the duration; and, the higher the coupon, the lower the duration.

A measure of risk

Duration is an important measure of the interest rate risk of a bond or a portfolio of bonds, as it reflects the likely price volatility related to changes in interest rates. The higher the duration of an asset or a portfolio, the higher the interest rate risk and the higher the likely price volatility.


See also

Bond maturity
Maturity date
Yield to maturity


A long history of innovation