Estimating Bond P&L Around a Yield Curve Unwind
A yield curve inversion — when short-term rates sit above long-term rates — is widely read as a signal of slowing growth, and market yields often swing sharply as that inversion eventually unwinds. Because bond prices move in the opposite direction of yields, sketching out a scenario for where rates might head can help you estimate the potential gain or loss on a bond position before it happens.
This calculator uses one of the most common approximations in bond investing: "% price change ≈ -duration × yield change." Enter the bond's face value, duration, current market yield (YTM), and the yield change you're assuming, and it shows you the estimated percentage price move along with the dollar gain or loss. You can see directly how a falling yield (as might happen when an inversion unwinds) lifts the bond's price, while a rising yield pushes it down.
This approximation is most accurate for small yield changes; larger moves introduce error due to convexity that this simple formula doesn't capture. Use this result as a starting estimate for bond decisions, and confirm the bond's exact duration and current price with your broker before investing.
Frequently Asked Questions
When an inversion unwinds, market yields often move sharply. Since bond prices move inversely to yields, forming a view on rate direction during that unwind can help you gauge potential gains or losses on a bond position ahead of time.
Duration measures a bond's price sensitivity to yield changes and is typically listed in your broker's bond details page or in a fund's or ETF's prospectus. Longer maturities and lower coupon rates generally mean higher duration.
This calculator uses the approximation "% price change ≈ -duration × yield change." The larger the yield move, the more the estimate can diverge from the actual price due to convexity, so treat the result as a rough guide only.