Summary

Bond investors are interested in the sensitivity of their bond holdings to changes in interest rates. Duration shows that interest rate sensitivity declines as bond coupon gets larger and increases as maturity increases, except for some very-long-maturity discount bonds. Shorter-maturity, higher-coupon bonds are low-risk; longer-maturity, lower-coupon bonds are high-risk.

Some investors are immunizers who want to lock-in a terminal value at a particular horizon date. These investors can select from the zero-coupon bond, maturity, duration, and dedicated strategies. Buying zero-coupon bonds (strips) is an excellent strategy, if available.