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A comment on Conterintuitive facts in mathematics, CS, and physics. Parent comment
Let’s say newly issued 100yr Treasuries pay a 1% coupon today, but tomorrow the coupon will be 2%, how much does the price of the older bond change?
The answer is a near 50% loss, simply because this is required to bump the yield of the older bond to 2%.
(If we include the discounted principal payment the exact answer becomes a 41.3% loss)
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Let’s say newly issued 100yr Treasuries pay a 1% coupon today, but tomorrow the coupon will be 2%, how much does the price of the older bond change?
The answer is a near 50% loss, simply because this is required to bump the yield of the older bond to 2%.
(If we include the discounted principal payment the exact answer becomes a 41.3% loss)