Quick answer
Duration is a measure of how much a bond's value is likely to change if interest rates rise or fall [1]. As a rough rule, a 1 percentage-point rate rise lowers the price by about the duration number in percent.
#How do you use duration as a rule of thumb?
FINRA's rule of thumb: for every 1 percentage-point change in interest rates, a bond's price moves in the opposite direction by about its duration number [1]. FINRA's illustration is a bond with a duration of 10, which would fall about 10% if rates rose 1 point, and rise about 10% if rates fell 1 point [1]. So a $10,000 holding with a duration of 8 would lose roughly $800 on a 1-point rate rise.
#What makes duration higher or lower?
FINRA summarizes it this way: in general, the higher the coupon rate, the lower the duration; the longer the maturity, the higher the duration [1]. Call features and the bond's yield also enter the calculation [1]. Longer bonds carry more rate risk because there is more time for rates to change [2].
Worked example
Testing the rule of thumb
Three bonds pay a 4% annual coupon and are priced at par to yield 4%. We compute duration in code, then reprice each bond at a 5% and a 3% yield.
- 2-year bond: duration 1.89
- +1 point: −1.86% · −1 point: +1.91%
- 10-year bond: duration 8.11
- +1 point: −7.72% · −1 point: +8.53%
- 30-year bond: duration 17.29
- +1 point: −15.37% · −1 point: +19.60%
The rule of thumb is close for small moves and short bonds. For long bonds it overstates losses and understates gains, because the price–yield relationship is curved.
Duration shown is modified duration with annual compounding. Hypothetical bonds; figures ignore taxes and costs.
| Feature | Effect on duration |
|---|---|
| Longer time to maturity | Higher duration, more price sensitivity |
| Higher coupon rate | Lower duration |
| Shorter time to maturity | Lower duration, less price sensitivity |
#Does duration tell you if a bond is safe?
No. Duration describes sensitivity to interest rates only. It says nothing about whether the issuer will pay you back, which is credit risk, or how easily you can sell, which is liquidity. Bond funds also report duration for the whole portfolio. For the bigger picture, read bond prices and interest rates.
Related terms
Frequently asked questions
Is duration measured in years?
It depends on the version. Macaulay duration is commonly described as a weighted average time, in years, until the bond's cash flows arrive. The figure used for price sensitivity, as in FINRA's rule of thumb, is usually quoted as a plain number.
If I hold a bond to maturity, does duration matter?
Price swings along the way matter less if you hold to maturity and the issuer pays in full, but they matter a lot if you need to sell early or own a bond fund.
Sources
Grade A = primary source (regulator, government agency, official rulebook or the index provider's own documents). Numbers in brackets in the text point here.
- FINRA. Brush Up on Bonds: Interest Rate Changes and Duration (2024). Accessed 2026-10-03.A
- U.S. SEC — Investor.gov. What Are Corporate Bonds? — Investor Bulletin (2013). Accessed 2026-10-03.A
This page is general education, not personal financial, tax or legal advice. Figures in worked examples are hypothetical and calculated before taxes and fees unless stated. Rules and limits change; check the linked primary sources for the current version. How we check every page.
