The market value of bonds moves in the opposite direction of interest rates.

Question

Quizplus · Accepted Answer

This is because when interest rates increase, the fixed interest payments on existing bonds become less attractive to investors, thus decreasing demand and causing the bond's market value to decrease. When interest rates decrease, existing bonds with higher fixed interest payments become more attractive, thus increasing demand and causing the bond's market value to increase.

The Market Value of Bonds Moves in the Opposite Direction