Regardless of the size of the coupon payment, the price of a bond moves in the opposite direction to interest rate movements. For example, if interest rates rise, bond prices fall.

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This is a fundamental principle of bond pricing. When interest rates rise, the return (yield) that new investors could earn from buying a newly issued bond increases. As a result, holders of previously issued bonds with lower coupon payments are willing to sell their bonds at a lower price to match the higher return available on new bonds. This causes the price of existing bonds to fall. The opposite happens when interest rates fall – bond prices rise as investors are willing to pay more for the fixed payments given the lower yield available elsewhere.

Regardless of the Size of the Coupon Payment, the Price