Interest rate futures
What is the inverse relationship between bond futures price and underlying Treasury yield?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Bond futures prices move inversely to yields because fixed coupon payments become relatively more or less attractive as prevailing market rates change, so rising yields push futures prices down and vice versa.
How it works
This duration-driven relationship means that when the Fed raises rates or inflation expectations rise, existing fixed-coupon bond futures lose value, and the opposite occurs in falling-rate environments.
An example
When 10-year Treasury yields rose from 1.5% to 4.5% in 2022, ZN futures prices dropped significantly as the fixed 6% notional coupon became less competitive.
Risk & limitations
Convexity effects mean the price-yield relationship isn't perfectly linear, so hedges based on simple duration estimates can be imprecise during large rate moves.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.