What Happens if Bond Rates Rise 1%

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What we expect will happen to bond prices
if interest rates Rise/Fall by 1%

Example used as illustration only, not indicative of any particular investment, actual results will vary. 

This chart demonstrates how the pricing of bonds reacts to changes in interest rates. What is clear is that the longer the bond maturity, the greater the value will change in reaction to a change in interest rates. ie: if interest rates go up 1% the seven year bond will drop 5.5% in market value. Conversely, if interest rates go down 1% the seven year bond should rise 6.4% in market value.

In general the bond market is volatile, and fixed income securities carry interest rate risk.  (As interest rates rise, bond prices usually fall, and vice versa.  This effect is usually more pronounced for longer-term securities.)  Fixed income securities also carry inflation risk and credit and default risks.  Any fixed income security sold or redeemed prior to maturity may be subject to substantial gain or loss.  The bonds are subject to availability.  Bonds are subject to interest rate, market, inflation and credit risks.  Bonds that are rated by Moody’s at Ba or below are considered to have speculative elements and the repayment ability of the issuer is not assured.