[Verse 1]
Picture bonds as weathervanes that spin with market winds
When rates climb up, their prices tumble down again
Sarah bought a bond at par, thought she'd safely won
Then the Fed raised rates and watched her value come undone
[Chorus]
Interest rate risk, it's the seesaw dance
When rates go high, bond prices prance downward
When rates fall low, bond prices grow upward
Inverse relation, that's the market's stance
Interest rate risk in every bond romance
[Verse 2]
Duration tells the story of how sensitive you are
A ten-year bond feels tremors much more than bonds near shore
Each percentage point that shifts in market's racing heart
Multiplies by duration, tears your holdings apart
[Chorus]
Interest rate risk, it's the seesaw dance
When rates go high, bond prices prance downward
When rates fall low, bond prices grow upward
Inverse relation, that's the market's stance
Interest rate risk in every bond romance
[Bridge]
Fixed coupon payments stay the same each year
But newer bonds pay more when rates veer
Your old bond's discount grows with every Fed decree
Price adjusts to match what new investors see
[Verse 3]
Portfolio managers hedge with ladders and with swaps
Diversify maturities before the hammer drops
Short-term bonds feel gentle nudges in the breeze
While long-term bonds can buckle, bringing holders to their knees
[Chorus]
Interest rate risk, it's the seesaw dance
When rates go high, bond prices prance downward
When rates fall low, bond prices grow upward
Inverse relation, that's the market's stance
Interest rate risk in every bond romance
[Outro]
Remember the golden rule before you place your bet
Rising rates mean falling bonds, a truth you won't forget