The yield on 10-year Greek bonds were 10% last week. That’s 2% points higher than they were on May 22. Remember, bond prices fall when interest rates rise. Bond price sensitivity is measured by duration. As a general rule of thumb for every 1% increase in rates the principal value drops in percentage terms by the duration. For example, a 1% increase in interest rates would be about a 10% loss in value on a 10-year zero coupon bond. That’s how rate volatility is wreaking havoc on Greek bond investors.
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