How it works
For a small yield change, percentage price change is approximately −modified duration × change in yield. Use the yield change as a decimal. Fifty basis points means 0.50 percentage points, or 0.005, not 0.50. The negative sign reflects the inverse price-yield relationship when promised payments remain unchanged.
Longer payment timing and lower coupons generally increase sensitivity, other conditions equal. A fund's duration summarizes its current holdings and may change as securities mature or managers rebalance. An ordinary bond fund does not necessarily provide a single maturity date when an investor's original purchase price will be returned.
Worked example
Suppose a fictional bond has modified duration 6 and a full price of 1,000. Its required yield rises from 4% to 4.5%, a 0.005 change. Estimated price movement is −6 × 0.005 = −3%, giving approximately 970. A comparable 0.50-point yield decline suggests approximately +3%. These are immediate price estimates before coupon income, costs and convexity adjustments.
Interpretation and limits
Duration is a local linear approximation. Larger yield moves require attention to the curved price-yield relationship, called convexity. Nonparallel yield-curve changes, credit spreads and embedded options can undermine the simple estimate. Callable bonds may require effective duration. Low duration does not remove default, liquidity, inflation or currency risk.
Chart practice
Read the issuer's or fund's dated duration definition separately, then inspect available closed bars for a supported instrument. Student Wyckoff Pro provides chart analysis; a price pattern alone does not reveal verified duration or isolate the cause of a bond fund's movement.
Primary sources
Sources explain the mechanics and limitations; the editorial examples use invented numbers rather than market quotations.
Your next practical step
Continue with analysis of available closed daily, weekly and monthly bars.
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