Duration

A bond sensitivity to interest rate changes, measured in years.

Duration measures a bond price sensitivity to interest rate changes. Macaulay duration, expressed in years, is the weighted-average time to receive the bond cash flows. Modified duration converts that into an estimated price move: a bond with modified duration of 5 falls roughly 5 percent if rates rise 1 percent. Longer-duration bonds are more rate-sensitive.

With a duration of 8 years, the bond fund dropped sharply when interest rates jumped.