Duration and Convexity Reference Table for Bond Investors
Direct answer: Duration measures a bond's sensitivity to interest rate changes: a bond with duration of 7 years loses approximately 7% in price when yields rise 1%. Convexity measures how duration itself changes as yields change. Longer-duration bonds have greater convexity, meaning they gain more from falling rates than they lose from rising rates (beneficial asymmetry). Mortgage-backed securities have negative convexity (bad asymmetry).
Duration and Price Sensitivity for Common Bond Types
| Bond Type | Typical Maturity | Approx. Duration | Price Change per 1% Rate Rise |
|---|---|---|---|
| 3-Month T-Bill | 3 months | 0.25 yr | -0.25% |
| 2-Year Treasury | 2 years | 1.95 yr | -1.95% |
| 5-Year Treasury | 5 years | 4.6 yr | -4.6% |
| 10-Year Treasury | 10 years | 8.5 yr | -8.5% |
| 30-Year Treasury | 30 years | 19 yr | -19% |
| Investment-Grade Corp (avg) | 5-7 yr avg | 7.2 yr | -7.2% |
| High-Yield Corp (avg) | 4-5 yr avg | 3.5 yr | -3.5% |
| TIPS (10-yr) | 10 years | 7.5 yr | -7.5% |
| Bloomberg US Agg ETF (AGG) | varies | 6.5 yr | -6.5% |
| 30-Yr MBS (FNMA) | 30 yr nominal | ~5-6 yr effective | -5% to -6% |
Note: Duration is Macaulay/modified duration approximation. Actual price change depends on convexity and size of rate change. MBS effective duration varies with prepayment speeds.
Source: St. Louis Fed FRED: Treasury Rates. Last verified: September 2026.
Frequently asked questions
Why do high-yield bonds have lower duration than investment-grade?
High-yield bonds have shorter duration for two reasons: (1) they are typically shorter-maturity instruments (5-7 years vs. 10-30 years for investment-grade); (2) their higher coupon payments return cash faster, reducing the weighted average time to receive cash flows. Short duration means HY bonds are less sensitive to interest rate changes. This is one reason HY bonds performed better than long-duration investment-grade bonds in 2022 (HY OAS widened but short duration limited rate-driven price decline). The tradeoff: HY bonds are more sensitive to credit/default risk and economic conditions.
What is convexity and why does it matter?
Convexity is the second-order measure of bond price sensitivity. Duration approximates price change for small rate moves; convexity corrects the estimate for larger moves. Positive convexity (most bonds): when rates fall 2%, price rises more than 2x (duration x rate change); when rates rise 2%, price falls less than 2x (duration x rate change). The asymmetry is favorable. Negative convexity (mortgage-backed securities): when rates fall, homeowners refinance, shortening the MBS duration and limiting price appreciation; when rates rise, homeowners hold mortgages longer, extending duration and amplifying losses. This explains why MBS underperform plain Treasuries in both rising and falling rate environments.
How do I use duration to manage bond portfolio risk?
Duration management allows investors to control their bond portfolio's interest rate risk. Desired approach: match portfolio duration to investment horizon to immunize against rate changes (a 7-year duration portfolio exactly offsets rate risk for a 7-year liability, in theory). Reduce duration (buy shorter maturity bonds or float-rate notes) when expecting rates to rise. Increase duration (buy longer bonds) when expecting rates to fall. Duration management in practice: (1) ladder strategy -- buy bonds maturing at regular intervals; (2) bullet strategy -- concentrate maturities at target date; (3) barbell -- combine short and long maturities, avoiding the middle.