{"id":4345,"date":"2022-08-19T11:54:17","date_gmt":"2022-08-19T11:54:17","guid":{"rendered":"https:\/\/goldenpi.com\/blog\/?p=4345"},"modified":"2026-05-16T13:31:27","modified_gmt":"2026-05-16T13:31:27","slug":"what-is-the-relationship-between-bond-prices-and-interest-rates","status":"publish","type":"post","link":"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/","title":{"rendered":"What is the relationship between bond prices and interest rates?"},"content":{"rendered":"\n<p><a href=\"https:\/\/goldenpi.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">Bond investments<\/a> have witnessed a significant surge in interest among Indian investors over the past few years &#8211; and for good reason. Between 2022 and 2023, aggressive rate hikes by global central banks, including the Reserve Bank of India, pushed bond yields to multi-year highs, making fixed-income instruments far more attractive than they had been in a long time. Since then, as rate cycles have started to ease, savvy investors have increasingly turned to bonds to lock in superior yields before rates decline further.<\/p>\n\n\n\n<p>Even in 2025\u201326, market conditions remain dynamic. Equity markets have experienced bouts of sharp volatility, geopolitical tensions continue to create uncertainty, and inflation &#8211; though moderating &#8211; has not fully retreated. In this environment, bonds offer something equities cannot: predictable, contractual returns. It is no surprise then that more investors &#8211; both retail and institutional &#8211; are now building diversified portfolios anchored by fixed-income securities.<\/p>\n\n\n\n<p>However, as interest in bonds grows, so do the questions. One of the most commonly misunderstood aspects of bond investing is the relationship between bond prices and interest rates. Why do bond prices fall when interest rates rise? Why does the same bond trade at different prices on different days even though its coupon never changes? These are not just theoretical questions &#8211; they have direct implications for how much you earn or lose when you buy or sell a bond in the secondary market.<\/p>\n\n\n\n<p>Understanding this relationship is fundamental to becoming a more informed bond investor. Let&#8217;s break it down clearly.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_79_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#What_is_the_bond_price\" >What is the bond price?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#What_is_coupon_rate_or_Interest_rate\" >What is coupon rate or Interest rate?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#Bond_prices_and_Interest_rates_are_in_inverse_relationship\" >Bond prices and Interest rates are in inverse relationship<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#The_cause_for_the_impact_on_bond_Price_and_Interest_rate_variation\" >The cause for the impact on bond Price and Interest rate variation.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#FAQs_on_What_is_the_relationship_between_bond_prices_and_interest_rates\" >FAQ&#8217;s on What is the relationship between bond prices and interest rates?<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_bond_price\"><\/span><b>What is the bond price?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\"><a href=\"https:\/\/goldenpi.com\/blog\/essentials\/bond-introduction\/why-do-bond-prices-and-yields-move-in-opposite-directions\/\">Bond price<\/a> is face value of the bond while buying bond though you may either be discounted or higher pricing but the face value will be constant. <\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_coupon_rate_or_Interest_rate\"><\/span><b>What is coupon rate or Interest rate?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">Coupon rate is that the bond issuers pay interest on the bond&#8217;s face value, which is known as the <a href=\"https:\/\/goldenpi.com\/blog\/fixed-income\/govt-securities\/what-is-a-coupon-rate\/\">coupon rate<\/a>. In other words, it is the interest that is paid to the bond buyer regularly by the bond issuer. Bonds&#8217; coupon rates are calculated using their face values.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">For example, if the coupon rate on a bond is 5 % on a <a href=\"https:\/\/goldenpi.com\/collections\/bonds-at-10000\">Rs.10000 bond<\/a>, the coupon payment comes out to Rs. 500 per year.<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Coupon rate = Annual Coupon rate \/ Par value of the bond or face value of the bond&nbsp;<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400;\">Par Value = Rs.10000<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Coupon Rate = 5%<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Annual Coupon = Rs. 100,00 x 5% = Rs.500<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400;\">Since most <a href=\"https:\/\/goldenpi.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">bonds<\/a> pay interest semi-annually, the bondholder receives two separate coupon payments of Rs.250 each year for as long as the bond is still outstanding.<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400;\">Number of Periods (N) = 2<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Coupon Payment = Rs.500 \/ 2 = Rs.250<\/span><\/li>\n<\/ul>\n\n\n\n<p><strong>Must Read<\/strong>: <strong><a href=\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-difference-between-coupon-rate-and-yield-of-maturity\/?utm_source=blog&amp;utm_medium=blog&amp;utm bond price interest rate\">What is the difference between Coupon Rate and Yield to Maturity?<\/a><\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Bond_prices_and_Interest_rates_are_in_inverse_relationship\"><\/span><strong>Bond prices and Interest rates are in inverse relationship<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">Interest rates and bond prices fluctuate in direct opposition to one another and have a direct impact on one another. Bond prices decline as market interest rates rise, and they increase when market interest rates decline (increase).<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><b>&nbsp;Interest rates increase and bond prices goes down <\/b><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\">If a XYZ buys a bond in January 2022 from ABC company with face value (Bond Price) of Rs. 1000 with a coupon rate (interest rate) 10 % and <a href=\"https:\/\/goldenpi.com\/blog\/sovereign-gold-bond\/what-is-the-tenure-or-maturity-period-of-sovereign-gold-bonds\/\">maturity<\/a> period 5 years (end with January 2027), payment duration semi-annually.&nbsp;<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Recent Post<\/h3>\n\n\n<ul class=\"wp-block-latest-posts__list is-grid columns-3 wp-block-latest-posts\"><li><div class=\"wp-block-latest-posts__featured-image aligncenter\"><a href=\"https:\/\/goldenpi.com\/blog\/gold-bonds\/why-gold-loan-backed-bonds-may-be-the-best-pick\/\" aria-label=\"Why Gold Loan Backed Bonds May Be the Best Pick in 2026\"><img decoding=\"async\" width=\"1024\" height=\"485\" src=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19090611\/Why-Gold-loan-backed-bonds-may-be-the-best-pick-1-1024x485.png\" class=\"attachment-large size-large wp-post-image\" alt=\"Why Gold loan backed bonds may be the best pick\" style=\"\" srcset=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19090611\/Why-Gold-loan-backed-bonds-may-be-the-best-pick-1-1024x485.png 1024w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19090611\/Why-Gold-loan-backed-bonds-may-be-the-best-pick-1-300x142.png 300w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19090611\/Why-Gold-loan-backed-bonds-may-be-the-best-pick-1-768x364.png 768w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19090611\/Why-Gold-loan-backed-bonds-may-be-the-best-pick-1-1536x727.png 1536w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19090611\/Why-Gold-loan-backed-bonds-may-be-the-best-pick-1.png 1823w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/div><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/goldenpi.com\/blog\/gold-bonds\/why-gold-loan-backed-bonds-may-be-the-best-pick\/\">Why Gold Loan Backed Bonds May Be the Best Pick in 2026<\/a><\/li>\n<li><div class=\"wp-block-latest-posts__featured-image aligncenter\"><a href=\"https:\/\/goldenpi.com\/blog\/gold-bonds\/government-gold-bonds\/\" aria-label=\"Government Gold Bonds Explained: A Simple Guide for Indian Investors\"><img decoding=\"async\" width=\"1024\" height=\"486\" src=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19064655\/Government-Gold-Bonds-Explained-1-1024x486.png\" class=\"attachment-large size-large wp-post-image\" alt=\"Government Gold Bonds Explained (1)\" style=\"\" srcset=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19064655\/Government-Gold-Bonds-Explained-1-1024x486.png 1024w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19064655\/Government-Gold-Bonds-Explained-1-300x142.png 300w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19064655\/Government-Gold-Bonds-Explained-1-768x364.png 768w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19064655\/Government-Gold-Bonds-Explained-1-1536x729.png 1536w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19064655\/Government-Gold-Bonds-Explained-1.png 1821w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/div><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/goldenpi.com\/blog\/gold-bonds\/government-gold-bonds\/\">Government Gold Bonds Explained: A Simple Guide for Indian Investors<\/a><\/li>\n<li><div class=\"wp-block-latest-posts__featured-image aligncenter\"><a href=\"https:\/\/goldenpi.com\/blog\/bond-news\/sovereign-gold-bond-scheme-discontinued-for-new-issues\/\" aria-label=\"Sovereign Gold Bond Scheme: Discontinued for New Issues, But Existing Holders Are Sitting on 200% Returns\"><img decoding=\"async\" width=\"1024\" height=\"486\" src=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19090040\/SGBs-discontinued-1-1024x486.png\" class=\"attachment-large size-large wp-post-image\" alt=\"SGBs discontinued (1)\" style=\"\" srcset=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19090040\/SGBs-discontinued-1-1024x486.png 1024w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19090040\/SGBs-discontinued-1-300x142.png 300w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19090040\/SGBs-discontinued-1-768x364.png 768w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19090040\/SGBs-discontinued-1-1536x729.png 1536w, https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2026\/05\/19090040\/SGBs-discontinued-1.png 1821w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/a><\/div><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/goldenpi.com\/blog\/bond-news\/sovereign-gold-bond-scheme-discontinued-for-new-issues\/\">Sovereign Gold Bond Scheme: Discontinued for New Issues, But Existing Holders Are Sitting on 200% Returns<\/a><\/li>\n<\/ul>\n\n\n<p><span style=\"font-weight: 400;\">XYZ will receive Rs.50 once every six months as interest against the bond price for the next five years. <\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">The cash flow. <\/span><\/p>\n\n\n\n<figure class=\"wp-block-table\"><div class=\"pcrstb-wrap\"><table class=\"has-fixed-layout\"><thead><tr><td><strong>Parameter \/ Date<\/strong><\/td><td><strong>Amount (Rs.)<\/strong><\/td><\/tr><\/thead><tbody><tr><td><strong>Bond Price<\/strong><\/td><td><strong>1,000<\/strong><\/td><\/tr><tr><td><strong>Coupon Rate<\/strong><\/td><td><strong>10%<\/strong><\/td><\/tr><tr><td><strong>Maturity Date<\/strong><\/td><td><strong>5 years<\/strong><\/td><\/tr><tr><td><strong>01\/01\/22<\/strong><\/td><td>-1,000 <em>(Initial Outflow)<\/em><\/td><\/tr><tr><td><strong>01\/07\/22<\/strong><\/td><td>50<\/td><\/tr><tr><td><strong>01\/01\/23<\/strong><\/td><td>50<\/td><\/tr><tr><td><strong>01\/07\/23<\/strong><\/td><td>50<\/td><\/tr><tr><td><strong>01\/01\/24<\/strong><\/td><td>50<\/td><\/tr><tr><td><strong>01\/07\/24<\/strong><\/td><td>50<\/td><\/tr><tr><td><strong>01\/01\/25<\/strong><\/td><td>50<\/td><\/tr><tr><td><strong>01\/07\/25<\/strong><\/td><td>50<\/td><\/tr><tr><td><strong>01\/01\/26<\/strong><\/td><td>50<\/td><\/tr><tr><td><strong>01\/07\/26<\/strong><\/td><td>50<\/td><\/tr><tr><td><strong>01\/01\/27<\/strong><\/td><td>50<\/td><\/tr><tr><td><strong>01\/01\/27<\/strong><\/td><td>1,000 <em>(Principal Repayment)<\/em><\/td><\/tr><tr><td><\/td><td><\/td><\/tr><tr><td><strong>Interest Income<\/strong><\/td><td><strong>500<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n<p><span style=\"font-weight: 400;\">After the two year of the bond purchase, the same company issues the same bond with a higher interest rate (coupon rate).<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400;\">Bond price \u2013Rs. 1000<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Interest Rate &#8211; 11%<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Maturity \u2013 5 years&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Payment mode \u2013 Semi-annually&nbsp;<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400;\">Now the XYZ wants to sell the bond in the market but the buyer won\u2019t buy the bond at the face value (bond price at the time of purchase in January 2022) since the same bond has the higher interest rate currently. Therefore, the seller has to sell the bond at a lesser price than the purchase price.<\/span><\/p>\n\n\n\n<figure class=\"wp-block-table\"><div class=\"pcrstb-wrap\"><table class=\"has-fixed-layout\"><thead><tr><td><strong>Issue Details (Bond)<\/strong><\/td><td><strong>Purchased<\/strong><\/td><td><strong>Two Years Later<\/strong><\/td><\/tr><\/thead><tbody><tr><td><strong>Market Interest Rate<\/strong><\/td><td>10%<\/td><td>11%<\/td><\/tr><tr><td><strong>Coupon Rate (Semi-Annually)<\/strong><\/td><td>10%<\/td><td>10%<\/td><\/tr><tr><td><strong>Face Value (Bond Price)<\/strong><\/td><td>Rs. 1000<\/td><td>Rs. 1000<\/td><\/tr><tr><td><strong>Maturity<\/strong><\/td><td>5 years<\/td><td>3 years<\/td><\/tr><tr><td><strong>Selling Price &#8211; Bond<\/strong><\/td><td><strong>Rs. 1000<\/strong><\/td><td><strong>Rs. 800<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n<p><strong>Must Read<\/strong>: <strong><a href=\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/difference-between-corporate-and-governments-bonds\/?utm_source=blog&amp;utm_medium=blog&amp;utm bond price interest rate\">What is the difference between Corporate and Governments Bonds?<\/a><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><b>Interest rates decrease and bond prices goes down<\/b><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\">If a XYZ buys a bond in January 2022 from ABC company with face value (Bond Price) of Rs. 1000 with a coupon rate (interest rate) 10 % and maturity period 5 years (end with January 2027), payment duration semi-annually.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">XYZ will receive Rs.50 once every six months as interest against the bond price for the next five years.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">After the two year of the bond purchase, the same company issues the same bond with a higher interest rate (coupon rate).<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400;\">Bond price \u2013Rs. 1000<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Interest Rate \u2013 9%<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Maturity \u2013 5 years&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Payment mode \u2013 Semi-annually&nbsp;<\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400;\">Now the XYZ wants to sell the bond in the market but the buyer has to pay a higher price than the face value (bond price at the time of purchase in January 2022). Since the previous issue was issued at a higher interest rate than the current one. The buyer has to pay higher.<\/span><\/p>\n\n\n\n<figure class=\"wp-block-table\"><div class=\"pcrstb-wrap\"><table class=\"has-fixed-layout\"><thead><tr><td><strong>Issue Details (Bond)<\/strong><\/td><td><strong>Purchased<\/strong><\/td><td><strong>Two Years Later<\/strong><\/td><\/tr><\/thead><tbody><tr><td><strong>Market Interest Rate<\/strong><\/td><td>10%<\/td><td>7%<\/td><\/tr><tr><td><strong>Coupon Rate (Semi-Annually)<\/strong><\/td><td>10%<\/td><td>10%<\/td><\/tr><tr><td><strong>Face Value (Bond Price)<\/strong><\/td><td>Rs. 1000<\/td><td>Rs. 1000<\/td><\/tr><tr><td><strong>Maturity<\/strong><\/td><td>5 years<\/td><td>3 years<\/td><\/tr><tr><td><strong>Selling Price &#8211; Bond<\/strong><\/td><td><strong>Rs. 1000<\/strong><\/td><td><strong>Rs. 1200<\/strong><\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"The_cause_for_the_impact_on_bond_Price_and_Interest_rate_variation\"><\/span><b>The cause for the impact on bond Price and Interest rate variation.<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><span style=\"font-weight: 400;\">Inflation is one of the main factors influencing how bond prices and <a href=\"https:\/\/goldenpi.com\/blog\/bond-news\/what-are-the-interest-rates-offered-by-nbfc-bonds\/\">interest rates<\/a> change. The economy as a whole experiences constant price increases due to inflation. Bond prices will therefore be more affected by inflation.&nbsp;<\/span><\/p>\n\n\n\n<p><span style=\"font-weight: 400;\">Example: XYZ company may issue bonds with following before the inflation.<\/span><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><span style=\"font-weight: 400;\">Bond price \u2013 Rs.1000&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Interest rate (coupon rate): 10%<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Maturity \u2013 5 years&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">The same company may issue the same bond with the following during inflation.<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Bond price \u2013 Rs.1000&nbsp;<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Interest rate (coupon rate): 15%<\/span><\/li>\n\n\n\n<li><span style=\"font-weight: 400;\">Maturity \u2013 5 years. <\/span><\/li>\n<\/ul>\n\n\n\n<p><span style=\"font-weight: 400;\">Therefore, bond prices and interest rates are inversely correlated. Investors&nbsp; can choose bonds based on their investment plan.<\/span><\/p>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FAQs_on_What_is_the_relationship_between_bond_prices_and_interest_rates\"><\/span><strong>FAQ&#8217;s on What is the relationship between bond prices and interest rates?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>1. How are bond prices and interest rates related?<\/strong><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\">As per industry understanding, bond prices and interest rates move in opposite directions (inversely related). When interest rates increase, bond prices usually come down, and vice versa. This happens because new bonds with higher coupon rates make the existing bonds less appealing. Thus, their prices fall in the secondary market.<\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>2. How does a rate change affect your bond holdings?<\/strong><\/h3>\n\n\n\n<p><span style=\"font-weight: 400;\">Changes in interest rates only influence the \u201cmarket price of bonds\u201d prevailing in the secondary market. If you hold the bond to maturity, you continue receiving fixed interest and principal at maturity, as per the bond terms.&nbsp;<\/span><\/p>\n\n\n\n<p>&nbsp;<\/p>\n\n\n\n<p>Latest Updated: 23-02-2026<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Bond investments have witnessed a significant surge in interest among Indian investors over the past few years &#8211; and for good reason.&hellip;<\/p>\n","protected":false},"author":4,"featured_media":11978,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"categories":[24],"tags":[],"class_list":["post-4345","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bond-market"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What is the relationship between bond prices and interest rates? - GoldenPi | Blogs<\/title>\n<meta name=\"description\" content=\"What is the relationship between bond prices and interest rates?\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What is the relationship between bond prices and interest rates? - GoldenPi | Blogs\" \/>\n<meta property=\"og:description\" content=\"What is the relationship between bond prices and interest rates?\" \/>\n<meta property=\"og:url\" content=\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/\" \/>\n<meta property=\"og:site_name\" content=\"GoldenPi | Blogs\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/goldenpitech\" \/>\n<meta property=\"article:author\" content=\"goldenpitech\" \/>\n<meta property=\"article:published_time\" content=\"2022-08-19T11:54:17+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-05-16T13:31:27+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2022\/08\/24110854\/What-is-the-relationship-between-bond-prices-and-interest-rates.png\" \/>\n\t<meta property=\"og:image:width\" content=\"731\" \/>\n\t<meta property=\"og:image:height\" content=\"347\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Abhijit Roy | CEO &amp; CO-Founder - GoldenPi\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@GoldenPiTech\" \/>\n<meta name=\"twitter:site\" content=\"@GoldenPiTech\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Abhijit Roy | CEO &amp; CO-Founder - GoldenPi\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"6 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/\",\"url\":\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/\",\"name\":\"What is the relationship between bond prices and interest rates? - GoldenPi | Blogs\",\"isPartOf\":{\"@id\":\"https:\/\/goldenpi.com\/blog\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#primaryimage\"},\"image\":{\"@id\":\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#primaryimage\"},\"thumbnailUrl\":\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2022\/08\/24110854\/What-is-the-relationship-between-bond-prices-and-interest-rates.png\",\"datePublished\":\"2022-08-19T11:54:17+00:00\",\"dateModified\":\"2026-05-16T13:31:27+00:00\",\"author\":{\"@id\":\"https:\/\/goldenpi.com\/blog\/#\/schema\/person\/7b7afc706617dbf29357675946045722\"},\"description\":\"What is the relationship between bond prices and interest rates?\",\"breadcrumb\":{\"@id\":\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#primaryimage\",\"url\":\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2022\/08\/24110854\/What-is-the-relationship-between-bond-prices-and-interest-rates.png\",\"contentUrl\":\"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2022\/08\/24110854\/What-is-the-relationship-between-bond-prices-and-interest-rates.png\",\"width\":731,\"height\":347,\"caption\":\"relationship between bond prices and interest rates\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/goldenpi.com\/blog\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"What is the relationship between bond prices and interest rates?\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/goldenpi.com\/blog\/#website\",\"url\":\"https:\/\/goldenpi.com\/blog\/\",\"name\":\"GoldenPi | Blogs\",\"description\":\"All about bonds online in India\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/goldenpi.com\/blog\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/goldenpi.com\/blog\/#\/schema\/person\/7b7afc706617dbf29357675946045722\",\"name\":\"Abhijit Roy | CEO &amp; CO-Founder - GoldenPi\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/goldenpi.com\/blog\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/753eff78609551874c9773d3bee5eeab7bba3aa40f99a8b2405592eed9d9df89?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/753eff78609551874c9773d3bee5eeab7bba3aa40f99a8b2405592eed9d9df89?s=96&d=mm&r=g\",\"caption\":\"Abhijit Roy | CEO &amp; CO-Founder - GoldenPi\"},\"description\":\"With over 15 years of experience across fixed income and debt markets, he brings deep domain expertise along with a strong focus on investor education and transparency. An alumnus of IIT Kharagpur and IIM Calcutta, his views are personal and should not be considered investment advice.\",\"sameAs\":[\"goldenpitech\",\"https:\/\/www.linkedin.com\/company\/goldenpi\/\",\"https:\/\/x.com\/GoldenPiTech\"],\"url\":\"https:\/\/goldenpi.com\/blog\/author\/goldenpi\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"What is the relationship between bond prices and interest rates? - GoldenPi | Blogs","description":"What is the relationship between bond prices and interest rates?","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/","og_locale":"en_US","og_type":"article","og_title":"What is the relationship between bond prices and interest rates? - GoldenPi | Blogs","og_description":"What is the relationship between bond prices and interest rates?","og_url":"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/","og_site_name":"GoldenPi | Blogs","article_publisher":"https:\/\/www.facebook.com\/goldenpitech","article_author":"goldenpitech","article_published_time":"2022-08-19T11:54:17+00:00","article_modified_time":"2026-05-16T13:31:27+00:00","og_image":[{"width":731,"height":347,"url":"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2022\/08\/24110854\/What-is-the-relationship-between-bond-prices-and-interest-rates.png","type":"image\/png"}],"author":"Abhijit Roy | CEO &amp; CO-Founder - GoldenPi","twitter_card":"summary_large_image","twitter_creator":"@GoldenPiTech","twitter_site":"@GoldenPiTech","twitter_misc":{"Written by":"Abhijit Roy | CEO &amp; CO-Founder - GoldenPi","Est. reading time":"6 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/","url":"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/","name":"What is the relationship between bond prices and interest rates? - GoldenPi | Blogs","isPartOf":{"@id":"https:\/\/goldenpi.com\/blog\/#website"},"primaryImageOfPage":{"@id":"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#primaryimage"},"image":{"@id":"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#primaryimage"},"thumbnailUrl":"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2022\/08\/24110854\/What-is-the-relationship-between-bond-prices-and-interest-rates.png","datePublished":"2022-08-19T11:54:17+00:00","dateModified":"2026-05-16T13:31:27+00:00","author":{"@id":"https:\/\/goldenpi.com\/blog\/#\/schema\/person\/7b7afc706617dbf29357675946045722"},"description":"What is the relationship between bond prices and interest rates?","breadcrumb":{"@id":"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#primaryimage","url":"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2022\/08\/24110854\/What-is-the-relationship-between-bond-prices-and-interest-rates.png","contentUrl":"https:\/\/d2zny4996dl67j.cloudfront.net\/blogs\/wp-content\/uploads\/2022\/08\/24110854\/What-is-the-relationship-between-bond-prices-and-interest-rates.png","width":731,"height":347,"caption":"relationship between bond prices and interest rates"},{"@type":"BreadcrumbList","@id":"https:\/\/goldenpi.com\/blog\/essentials\/bond-market\/what-is-the-relationship-between-bond-prices-and-interest-rates\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/goldenpi.com\/blog\/"},{"@type":"ListItem","position":2,"name":"What is the relationship between bond prices and interest rates?"}]},{"@type":"WebSite","@id":"https:\/\/goldenpi.com\/blog\/#website","url":"https:\/\/goldenpi.com\/blog\/","name":"GoldenPi | Blogs","description":"All about bonds online in India","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/goldenpi.com\/blog\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/goldenpi.com\/blog\/#\/schema\/person\/7b7afc706617dbf29357675946045722","name":"Abhijit Roy | CEO &amp; CO-Founder - GoldenPi","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/goldenpi.com\/blog\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/753eff78609551874c9773d3bee5eeab7bba3aa40f99a8b2405592eed9d9df89?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/753eff78609551874c9773d3bee5eeab7bba3aa40f99a8b2405592eed9d9df89?s=96&d=mm&r=g","caption":"Abhijit Roy | CEO &amp; CO-Founder - GoldenPi"},"description":"With over 15 years of experience across fixed income and debt markets, he brings deep domain expertise along with a strong focus on investor education and transparency. An alumnus of IIT Kharagpur and IIM Calcutta, his views are personal and should not be considered investment advice.","sameAs":["goldenpitech","https:\/\/www.linkedin.com\/company\/goldenpi\/","https:\/\/x.com\/GoldenPiTech"],"url":"https:\/\/goldenpi.com\/blog\/author\/goldenpi\/"}]}},"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/goldenpi.com\/blog\/wp-json\/wp\/v2\/posts\/4345","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goldenpi.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goldenpi.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goldenpi.com\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/goldenpi.com\/blog\/wp-json\/wp\/v2\/comments?post=4345"}],"version-history":[{"count":17,"href":"https:\/\/goldenpi.com\/blog\/wp-json\/wp\/v2\/posts\/4345\/revisions"}],"predecessor-version":[{"id":13631,"href":"https:\/\/goldenpi.com\/blog\/wp-json\/wp\/v2\/posts\/4345\/revisions\/13631"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/goldenpi.com\/blog\/wp-json\/wp\/v2\/media\/11978"}],"wp:attachment":[{"href":"https:\/\/goldenpi.com\/blog\/wp-json\/wp\/v2\/media?parent=4345"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goldenpi.com\/blog\/wp-json\/wp\/v2\/categories?post=4345"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goldenpi.com\/blog\/wp-json\/wp\/v2\/tags?post=4345"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}