Illustrative stock photo: Pexels · Free-use licence Legally Insightful · Australian explainer Quick answer: Existing fixed-rate bonds generally fall in market value when comparable market yields rise. Their coupon payments do not automatically increase, so buyers usually demand a lower purchase price to obtain a competitive return. The coupon stays fixed while the market moves Suppose a bond pays $400 a year on $10,000 face value. New bonds with similar risks and maturity might later offer higher yields. Investors have less reason to pay $10,000 for the older bond if other investments now offer greater income for the same outlay. The older bond’s price can fall until its remaining payments, together with the final principal repayment, offer a competitive yield. The reverse is broadly true when market yields fall. This is the price–yield relationship, not a change to the original coupon contract. Duration explains the size of the reaction The longer an investor waits to receive...