Duration
Definition · Level 8 · Rates, FX & macro
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A bond’s sensitivity to yield changes: the slope of the price–yield curve at today’s yield. It is measured in years: the longer it is, the bigger the price move for the same change in yield.
Example
A 2-year note has a duration just under 2 years; a 30-year bond, roughly 15 to 18.
Where Tradecraft teaches it
Level 8 · Rates, FX & macro, in the lesson “Duration and DV01”: How far a bond’s price moves when yields change, in percent and in dollars per basis point.
Related terms
- DV01Dollar value of a basis point: a position’s dollar P&L for a 1 bp yield change ≈ modified duration × market value × 0.0001.
- Macaulay durationWeighted-average time, in years, until a bond’s cash flows arrive, each weighted by its present value (today’s worth).
- Modified durationApproximate % price change for a 100 bp (basis point) yield move: Macaulay ÷ (1 + y/k), with k coupons per year.
- 2s10sThe 10-year Treasury yield minus the 2-year yield, in bp: the headline gauge of curve slope.
- Annualized rateA short-period rate compounded to a year: (1 + monthly rate)^12 − 1, or (1 + quarterly rate)^4 − 1.
- Bank RateThe Bank of England’s policy rate, set by the Monetary Policy Committee at eight meetings a year, aiming at 2% inflation.