Duration
How much a bond's price will move when interest rates change.
A duration of 8 means a 1% rise in rates should cut the bond's price by roughly 8%. It is a sensitivity measure, expressed in years.
It is why 'safe' government bonds delivered brutal losses in rising-rate environments: investors owned long duration and did not understand what that meant.
Normal, and inverted
Inversion means investors will lock in today's rate for a decade rather than roll short-term debt. They are betting rates, and therefore growth, will be lower later.
It is the single most important risk number in fixed income.
Buying long-dated bonds for safety without realising that safety refers to default risk, not price risk.
Related terms
See Duration on a real company
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