How the bond system works
Sunday 20 September 1998
Between these dates, the bonds can be bought and sold on the markets. The price moves up and down in line with interest rates.
When interest rates rise, the price of a bond goes down because its coupon rate becomes less attractive than newer bonds issued when rates are higher.
If rates fall, the bond's coupon rate becomes more attractive to investors, which drives up the capital value of the bond on the open market.
The longer a bond has to go until maturity, the more it is affected by rate movements as no one can predict what will happen in the long term.
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