Bond Prices vs Yields: The Inverse Relationship
A 10-year Treasury yielding 4.28% sounds straightforward until you realize that yield moved from 3.97% to 4.28% in just two weeks — and that shift destroyed roughly 2.5% of the bond's market value. That's the inverse relationship between bond prices and yields in action, and it's the single most important concept in fixed income investing. Most investors understand that bond yields represent interest payments. Fewer grasp why rising yields mean falling prices, or how to use that knowledge to make better portfolio decisions. With the Fed funds rate at 3.64% and the yield curve steepening — the 10-year now sits 55 basis points above the 2-year — understanding bond price mechanics has immediate practical value for anyone holding or considering fixed income. If you're new to bonds entirely, start with our guide to how Treasury bonds work.