Terms explained: when a bond's yield rises, its price fallsThe price of the paper that lends money to the state, and the return on it
In the government bond interest rate information that the Ministry of Finance publishes every business day, the 10-year yield rose from 2.837 percent on October 23, 2026 (Reiwa 8) to 2.876 percent on October 29. The news calls this a rise in interest rates, but seen from the price side it means that the price of bonds already issued has fallen. Here we check why the two move in opposite directions, using a simple calculation.
- Total received after one year (1 interest plus 100 principal)
- 101
- Price at a yield of 1 percent (101 divided by 1.01)
- about 100.00
- Price at a yield of 2 percent (101 divided by 1.02)
- about 99.02
- Price at a yield of 3 percent (101 divided by 1.03)
- about 98.06
Key points
- In the Ministry of Finance data, the 10-year yield was 2.837 percent on October 23, 2026, 2.824 percent on October 26, 2.867 percent on October 28 and 2.876 percent on October 29, moving every business day
- A bond's yield is worked out by dividing the interest and principal still to be received by the price you pay now, so a lower price means a higher yield and a higher price means a lower yield
- Take a bond with a face value of 100 that pays 1 of interest plus 100 of principal after one year, that is 101 in total. At a yield of 1 percent the price is about 100.00, at 2 percent about 99.02, and at 3 percent about 98.06
- So when rates are rising, the market value of bonds you already hold falls. Hold to maturity and you are redeemed at face value, but sell before then and you get the market value of the day
- The interest rate information covers yields by term from 1 year to 40 years every business day, and past series can be traced back in the same format
What to do in practice
- When you read that rates have risen, think at the same time about which way the market value of any bonds or bond funds you hold will move
- If you have securities measured at fair value at the balance sheet date, keep the supporting material for the value you used
A government bond is a piece of paper proving that you lent money to the state, and it can be bought and sold afterwards. Think of a bond that pays you 101 after one year. Someone who wants to make 1 percent in a year will pay 100 for it. Someone who wants 2 percent will only pay about 99. The more return people want, the cheaper the paper gets. That is why a news item saying rates have risen also means the paper has got cheaper.
- 1 LendLend money to the state and receive a bond
- 2 PromiseInterest and principal are to be paid later
- 3 TradeIt can be sold to someone else before maturity
- 4 PriceThe more return buyers want, the lower the trading price
Points
- A government bond is a promise to pay interest and principal later. It can still be bought and sold after you get it
- For the same paper, the cheaper you buy it, the bigger your return as a percentage
- So a rising yield and a falling price are the same thing seen from two sides
What the words mean
- government bond
- The paper the state issues when it borrows money, promising to pay it back later
- yield
- How much you gain in a year as a share of the money you put in
- Ministry of Finance: Ministry of Finance, Japanese Government Bond interest rate information
Economic news presents published statistics and outlooks. It is not investment solicitation or trading advice. Figures are as of publication and may be revised.
This article summarizes and explains materials published by government agencies and is not advice on any individual case. Rules can change, so for actual procedures and decisions always check the latest original materials and consult professionals such as tax accountants or labor and social security attorneys. English, Simplified Chinese and Traditional Chinese versions are translations prepared from the Japanese articles for convenience. If anything differs, the Japanese text and the original source take precedence.