the sensitivity of the invested bonds to interest rate changes (also known as duration),

Interest rate sensitivity

The rise and fall of bond prices are inversely related to the rise and fall of interest rates. When interest rates rise, bond prices fall. To know the change of bond price, so as to know how sensitive the net asset value of bond funds is to the change of interest rate, duration can be used as an indicator to measure it.

Duration depends on three factors of a bond: maturity, cash flow of principal and interest expenses, and yield to maturity. Duration is calculated in years, but it is a different concept from the maturity of bonds. With the help of this indicator, you can know how much the fund under investigation has gained or lost due to the change of interest rate.

the longer the duration, the more sensitive the net asset value of bond funds is to the change of interest. If the duration of a bond fund is 5 years, if the interest rate drops by 1 percentage point, the net asset value of the fund will increase by about 5 percentage points; Conversely, if the interest rate rises by 1 percentage point, the fund's net asset value will suffer a loss of 5 percentage points. Another example is that there are two bond funds with a duration of 4 years and 2 years respectively, and the fluctuation of the net asset value of the former is about twice that of the latter.