What is bond duration in simple terms?

Duration is a measure, in years, of how sensitive a bond or bond fund is to interest rates. As a rule of thumb, the price moves by about its duration in percent for each one-point change in rates, in the opposite direction: a duration of 6 means roughly a 6% fall if rates rise 1 point.

Why did bonds fall so much in 2022?

Interest rates rose by roughly 2.5 to 3.5 percentage points in a single year, the fastest climb in about 40 years. Existing bonds paying the old, low rates lost value to match. The longer the duration, the bigger the fall: short-term Treasuries fell about 5% at their worst, the total bond market about 16%, and long-term Treasuries about 31% by price.

Are short-term bond funds safer than long-term ones?

Safer from interest-rate swings, yes: their prices move much less when rates change. But they usually pay less when rates are stable or falling, and they gain little in a crash where rates drop, which is when long bonds have tended to help most. Safety depends on which risk you are protecting against.

Do bond funds recover after rates rise?

Usually, through income rather than price alone. After a rise, the fund reinvests at higher rates, so its yield goes up and gradually offsets the price loss. As an approximation, an investor who holds for about the fund's duration or longer tends to come out close to where a steady-rate path would have left them. It is not guaranteed if rates keep rising.

Where do I find a bond fund's duration?

On the fund provider's fact sheet or fund page, often labelled "effective duration" or "average duration". It changes over time as the fund's holdings and rates change, so check the current figure rather than relying on an old article.

Bond Duration Explained: Why "Safe" Bonds Fell 30% in 2022

7 min read · Updated 2026-10-21

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Bonds are supposed to be the calm part of a portfolio. Then 2022 happened: interest rates rose faster than they had in decades, and some of the most conservative funds you can buy, ones that hold nothing but US government bonds, fell as far as the stock market. Plenty of investors learned in that year that "bonds" is not one thing.

The difference between a bond fund that barely moved and one that lost close to a third of its price comes down to a single number on the fact sheet: duration. This guide explains what it is, the rule of thumb that makes it useful, what real funds did in 2022, 2008 and 2020, and how to think about the bond side of your own mix. Educational, not a recommendation.

Stress-test your bonds against 2022 →

Why bond prices fall when rates rise

A bond is a promise to pay fixed interest and then return your money on a set date. Suppose you own a bond paying 2% a year and new bonds start paying 4%. Nobody will pay full price for your 2% bond when a 4% one is available, so its price drops until a buyer earns roughly the same 4% by paying less for it.

That is the whole mechanism: when market interest rates rise, the prices of existing bonds fall, and when rates fall, their prices rise. A bond fund is a basket of these bonds, so its price moves the same way. The question that matters is how far.

Duration: the rule of thumb

Duration measures a bond's sensitivity to interest rates, expressed in years. It depends mostly on how long you wait to get your money back: a bond that matures in two years locks in the old rate for only two years, while a 25-year bond locks it in for a generation, so its price has to adjust much further.

The useful part is the rule of thumb: a fund's price changes by roughly its duration, in percent, for each one-point move in interest rates, in the opposite direction. A fund with a duration of 6 years loses about 6% if rates rise by 1 percentage point, and gains about 6% if they fall by 1 point.

•Duration of about 2 years (short-term bonds): a 1-point rate rise costs about 2%.
•Duration of about 6 years (a total bond market fund): about 6%.
•Duration of about 16 years (long-term Treasuries): about 16%, close to a typical stock market correction.
•The rule is an approximation. For large moves it overstates the fall somewhat, and the interest the fund keeps collecting cushions it, but it gets the order of magnitude right.

What 2022 actually did to bond funds

In 2022 US interest rates rose by roughly 2.5 to 3.5 percentage points depending on the maturity, the fastest climb in about 40 years. Duration predicted the damage almost exactly in order.

Short-term Treasuries (SHY) fell about 5% at their worst. The total US bond market (BND) fell about 16%, and 7 to 10 year Treasuries (IEF) about 17%. Long-term Treasuries (TLT), with the longest duration, fell about 31%, against about 25% for the S&P 500 over the same months. A fund with no credit risk at all fell further than the stock market, purely because of duration.

Worst price fall in 2022, by bond fund (percent)

SHY (duration ~2 years)

BND (duration ~6 years)

16%

IEF (duration ~7 years)

17%

TLT (duration ~16 years)

31%

SPY (S&P 500, for scale)

25%

Deepest fall in daily closing prices (interest excluded) inside the S&P 500's 2022 peak-to-bottom window, from the crash study at /studies/etf-crashes (snapshot of 2026-09-16). Durations are approximate fact-sheet figures at the time of writing.

Duration cuts both ways: 2008 and 2020

The same sensitivity that hurt in 2022 is why long bonds have been prized as a crash hedge. In most stock market panics, investors run to government bonds and central banks cut rates, so rates fall and long-duration bond prices jump.

Over the months the S&P 500 fell about 56% in the 2008 financial crisis, TLT's price changed by about +18% and IEF's by +14%. In the 2020 COVID crash, while stocks fell about 34%, TLT moved +14% and IEF +6%. The difference in 2022 was the cause of the fall: the selloff was driven by rising rates and inflation, which is the one kind of crash where long bonds are part of the problem rather than the cushion.

Bond funds through three very different crashes (price only, approximate)
Fund	Duration	2008 crisis	2020 COVID	2022 rate shock (worst fall)
SHY: 1 to 3 year Treasuries	About 2 years	+4%	+2%	about -5%
BND: Total US bond market	About 6 years	+1%	-2%	about -16%
IEF: 7 to 10 year Treasuries	About 7 years	+14%	+6%	about -17%
TLT: 20+ year Treasuries	About 16 years	+18%	+14%	about -31%

2008 and 2020 columns: price change over each crash's S&P 500 peak-to-bottom window. 2022 column: the deepest fall inside that window. From the crash study at /studies/etf-crashes (snapshot of 2026-09-16); interest payments excluded, so total returns were somewhat better. Past crashes do not predict the next one.

Duration and time: why a fall in a bond fund can heal itself

There is a quieter half to the story. When rates rise, a bond fund's price falls, but from then on it reinvests at the new, higher rates, so its income rises. Over time that extra income works to make up the price loss.

A handy approximation: if you hold a bond fund for roughly its duration or longer, a one-time rate rise tends to wash out, because the higher income catches up with the price drop. That is why a 2-year duration fund suits money you need in two years, and why a 16-year duration fund is a poor place for a house deposit, however safe the issuer. Matching duration to when you need the money is the single most practical use of the number.

How to think about the bond side of your mix

Duration does not make one bond fund better than another. It tells you which risk you are carrying. A few questions help:

•When do you need the money? Short horizons point to short duration, where a rate shock costs little.
•What are the bonds for? If they are mainly a cushion for a stock crash, longer duration has helped in deflationary panics like 2008 and 2020, and hurt badly in an inflation-driven one like 2022.
•What do you already hold? A total bond market fund (US) or an aggregate fund (in Canada, the broad aggregate ETFs have run durations of roughly 7 years) already sits in the middle. Adding long Treasuries on top raises the rate bet.
•Check the fact sheet, not the name. "Government", "Treasury" and "investment grade" describe credit risk, not rate risk. Duration is listed separately, and it changes over time.

Test your bonds against both kinds of crash

Before relying on the bond side of a portfolio, replay it through 2008, 2020 and 2022 together in the stress test: a mix that looks safe in one of them can disappoint in another. The Stress Test also runs a hypothetical rate shock and estimates each holding's sensitivity to the 10-year Treasury yield from its own history, so a bond-heavy portfolio shows the hit it would really take. Then compare a short and a long bond fund head to head on the compare page to see the trade-off in returns and drawdowns.

Educational, not advice: the right bond mix depends on your goals, your horizon and everything else you own.

Try it yourself

Stress Test / ScenariosReplay your bonds through 2008, 2020 and 2022, plus a hypothetical rate shock.Open tool →Compare TLT vs BNDLong Treasuries against the total bond market, on real data.Open tool →Backtest PortfolioTest the stock and bond mix you hold with a short or a long bond fund.Open tool →

FAQ

What is bond duration in simple terms?: Duration is a measure, in years, of how sensitive a bond or bond fund is to interest rates. As a rule of thumb, the price moves by about its duration in percent for each one-point change in rates, in the opposite direction: a duration of 6 means roughly a 6% fall if rates rise 1 point.
Why did bonds fall so much in 2022?: Interest rates rose by roughly 2.5 to 3.5 percentage points in a single year, the fastest climb in about 40 years. Existing bonds paying the old, low rates lost value to match. The longer the duration, the bigger the fall: short-term Treasuries fell about 5% at their worst, the total bond market about 16%, and long-term Treasuries about 31% by price.
Are short-term bond funds safer than long-term ones?: Safer from interest-rate swings, yes: their prices move much less when rates change. But they usually pay less when rates are stable or falling, and they gain little in a crash where rates drop, which is when long bonds have tended to help most. Safety depends on which risk you are protecting against.
Do bond funds recover after rates rise?: Usually, through income rather than price alone. After a rise, the fund reinvests at higher rates, so its yield goes up and gradually offsets the price loss. As an approximation, an investor who holds for about the fund's duration or longer tends to come out close to where a steady-rate path would have left them. It is not guaranteed if rates keep rising.
Where do I find a bond fund's duration?: On the fund provider's fact sheet or fund page, often labelled "effective duration" or "average duration". It changes over time as the fund's holdings and rates change, so check the current figure rather than relying on an old article.

Key terms in this guide

Plain-English definitions in the Learning Hub.

Duration →Interest-rate shock →Maximum drawdown →Correlation →Stress test →

Already computed · real data

SHY vs TLT on real data

Side by side, same dates

Short-term Treasuries (SHY) grew from $10,000 to $13,000 between Jan 2007 and Oct 2026 (1.3% a year). Its worst fall was -5%, from May 2021 to Oct 2022, and it took 37 months (about 3 years) to get back to that high. Long-term Treasuries (TLT) grew from $10,000 to $13,999 between Jan 2007 and Oct 2026 (1.7% a year). Its worst fall was -48%, from Jul 2020 to Oct 2023, and it had not yet regained that high by Oct 2026.

Real 2007-01 to 2026-10 data, dividends reinvested, rebalanced yearly. Past performance doesn't predict future results.

Growth of $10,000, Jan 2007 to Oct 2026

Short-term Treasuries (SHY)Long-term Treasuries (TLT)

Run SHY with your own numbers →Run TLT with your own numbers →

Keep watching one of them, free: SHY or TLT. A free account saves it as your plan and checks it for you every month.

For educational and informational purposes only, not financial, investment, tax, or legal advice. Backtests are hypothetical; past performance does not guarantee future results.