When the market interest rate is lowered, the income of bond funds will indeed rise. There are two main factors affecting the performance of bond funds, one is interest rate risk, and the other is credit risk. Although the current credit risk has increased, default is still a minority phenomenon, which has little impact on income, mainly interest rate risk. When the market interest rate decreases, the interest rate of new debt increases, which leads to the outflow of funds from old debt to new debt, and the price of old debt held by the fund falls, and the net value of the fund is calculated by the bond price, which naturally falls.

On the whole, the change of market interest rate has a greater impact on long-term bonds than short-term bonds, so the fluctuation of market interest rate has a greater impact on bond funds with longer average maturity in bond portfolio. If investors expect the market interest rate to drop for a long time, they can invest in bond funds with a relatively long average term to obtain greater returns.