What Is Bond Duration?
A measure of how much a bond or bond fund's price will move for every 1% change in interest rates.
The Full Definition
Duration estimates how sensitive a bond or bond fund is to interest rate changes — specifically, the approximate percentage it will gain or lose for every 1% move in rates. A duration of 6 means a 1% rate increase costs roughly 6% of the investment's value; a duration of 2 means that same rate move costs only about 2%. Duration rises with a bond's time to maturity and falls with higher coupon payments. It's the single most useful number for understanding how much price risk a "safe" bond fund is actually carrying.
Real-World Example
In 2022, a total bond market fund with a duration around 6.5 lost roughly 13% of its value as interest rates rose about 2 percentage points — a reminder that "bonds" are not automatically low-risk just because they're not stocks.