Impact of Interest Rate Volatility on Bonds

A finance manager is evaluating the impact of interest rate volatility on the yield curve. She considers how shifts in interest rates can affect bond pricing over various maturities. The manager is particularly interested in how different bonds might react under fluctuating interest rate conditions, which can often be unstable due to economic changes.

To understand the dynamics of interest rate volatility, she reviews three different types of bonds: a long-term government bond, a corporate bond with high credit quality, and a short-term treasury bill. Based on her analysis, she contemplates how the perceived volatility in interest rates may lead to differing price changes for these bonds.