Long-Term Rate Risk(redirected from Long Term Rate Risk)
Long-Term Rate Risk
The risk of loss due to a change in interest rates on a long-term bond. If interest rates rise, the prices of bonds fall. This affects the secondary market for bonds; for example, if one purchases a bond with a 3% interest rate and the prevailing rate rises to 5%, it becomes difficult or impossible to resell the bond at a profit. Because long-term bonds have a maturity of several years, there is a greater possibility that interest rates will move in an adverse direction. Long-term rate risk is part of the reason that rates on long-term bonds are (usually) higher than those on short-term bonds. See also: Yield curve.