Why do prices and interest rates move in opposite directions? Assume that a person invests $1,000 in a 20-year bond with a yield (interest payments totaling $55 a year). If interest rates immediately rise to , another person could buy a $1,000 Treasury bond and get $65 a year in interest, so no one would be willing to pay $1,000 for the older bond paying , and so it would decline in price (in this case, to $889).On the other hand, if interest rates fell and new Treasury bonds (with similar maturities) were offered with a yield ($45 a year in interest), an investor would be.
