Duration in One Sentence
Modified duration is the percentage a bond’s price changes for a one-point change in its yield. A duration of 8 means a rise in yields from 5% to 6% costs about 8% of the price.
It grows with maturity, because the money comes back later and is discounted for longer, and it shrinks with a higher coupon, because more of the money comes back sooner. A zero-coupon bond’s duration roughly equals its maturity.
Today’s Treasuries, Priced at Par
Each bond pays a coupon equal to today’s yield for its maturity, twice a year. Price change for a one-point move in either direction.
Convexity: Why the Two Columns Are Not Equal
Look across each row: the gain when yields fall is larger than the loss when they rise. That asymmetry is convexity. A bond’s price is a curve, not a straight line, so duration (the slope at today’s yield) overstates the loss and understates the gain for large moves.
Convexity matters most for long bonds and big moves. For a 30-year Treasury, the difference between the duration estimate and the true price change runs to several percentage points on a two-point move.
How Investors Use It
Matching: a pension fund that owes payments in 15 years holds bonds with a duration near 15, so a change in rates moves its assets and its liabilities together.
Positioning: a manager who expects rates to fall lengthens duration to gain more; one who expects them to rise shortens it. DV01, the dollar change for a one-basis-point move, turns duration into money.
Takeaway. Duration tells you how much rate risk you own; convexity tells you that owning long bonds pays you a little for big moves in either direction.
Price Any Bond in the Bond Pricer
Figures in copper come straight from FRED and update every weekday; other figures are as of October 21, 2026. For education only, not investment advice.