Why Equal Yield Moves Change Bond Prices Differently
Summary
Hollow Point Trading shares a short lesson on why equal yield changes can produce unequal dollar changes in bond prices. The example uses a hypothetical default-free, noncallable three-year zero-coupon bond, comparing its price at 5% and 4% annual yields. Understanding this relationship helps the community interpret fixed-income price sensitivity.
https://youtu.be/VTwjGltpgNg
Equal yield moves can produce unequal bond price changes #Shorts
Equal yield changes can produce unequal dollar price changes. Consider a hypothetical default free, noncallable zero coupon bond paying one hundred dollars in three years. Use annual compounding and hold the remaining maturity fixed. At a five percent yield, its price is about eighty six dollars thirty eight cents. At four percent, it is eighty ...
