Glossary · Macro · Beginner-friendly
Duration
In plain English
Duration measures how sensitive a bond’s price is to interest-rate changes. Higher duration means bigger swings when rates move.
Everyday analogy: A long diving board wobbles more than a short one when someone jumps.
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Why it matters
Duration is rate sensitivity. It explains why long bonds and long-duration growth equities can sell off together when yields jump.
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Practical meaning
Think of duration as how much the bond’s price tends to move for a 1% yield change. Long-duration assets are more rate-sensitive.
Equity parallel
Long-duration growth stocks often behave like rate-sensitive assets because more of their value sits in distant cash flows.
Simple examples
Rates up
A sharp rise in yields can hit both long bonds and high-multiple growth equities in the same week.
Twin selloff
A sharp rise in yields hits both a long Treasury ETF and a high-multiple software basket in the same week.
Easy mistakes to avoid
- Buying long-duration bond funds without accepting rate risk
- Thinking short-duration and long-duration react the same
- Forgetting equity styles also embed duration-like sensitivity
Remember: Know your duration exposure in bonds - and in equity style.