“What happens to my bond ETF if rates rise 1%?” is the single most useful question a bond investor can answer before buying — and duration answers it in one multiplication. Pick your fund type (money market, short government, all-maturity aggregate, long government, or a custom duration from your fund’s factsheet), choose a rate move, and this calculator shows the approximate price impact in euros and percent — plus the part most people miss: how the higher yield afterwards recovers the loss in roughly duration years.
By Kestutis Balciunas · Last reviewed: 17 July 2026 · Figures and rules are 2026-vintage estimates — verify current data before acting. Educational tool, not advice.
The one-line formula
Price impact ≈ −modified duration × rate change. An all-maturity aggregate bond ETF with a modified duration of 6.5 years facing a +1 percentage-point rise in yields loses approximately 6.5% — €650 on a €10,000 position. A 1–3 year government fund with duration 1.9 loses only ~1.9% on the same move, and a money market ETF (duration ~0.3) barely notices. The same lever works in reverse: rate cuts produce gains of the same magnitude, which is exactly the mechanism behind how ECB rate cuts feed through to UCITS bond allocations.
2022 — the formula in the wild
This is not a textbook abstraction. In 2022 yields rose roughly 2 percentage points and all-maturity aggregate ETFs with durations around 7 fell 15% and more — right where −7 × 2 ≈ −14% puts you, with credit spreads adding the rest. Bond funds sold as the “safe” half of portfolios had their worst year in decades, an episode we unpack in the lessons of the 2022 EU bond meltdown. The failure was not the maths — it was that few investors had ever run it. Duration risk is visible in advance, in a way equity drawdowns never are; compare how bonds and equities actually behaved in our ETF volatility and drawdown comparison.
The caveat — and the healing
Two honest footnotes. First, the formula is a linear approximation: for moves beyond about ±1 point, convexity bends the line in your favour — real losses come in somewhat smaller and real gains somewhat larger than −D × Δy predicts, though for ETF-scale decisions the approximation is plenty. Second, and more importantly, a rate rise is only a permanent loss if you sell. After the drop, every coupon reinvests at the new higher yield, and the arithmetic works out so that the loss is healed in roughly duration years — duration is your break-even horizon. Hold a duration-6.5 fund for more than ~6.5 years and a rate rise leaves you better off than if rates had never moved. The practical rule: match duration to your holding period, and treat a duration mismatch as the real risk — a point worth revisiting whenever markets wobble, alongside our bear-market checklist for EU investors.
Choosing a duration on purpose
Once you can price the risk, duration becomes a dial rather than a surprise. Money you may need within a year or two belongs at the short end — money market and 0–1 year funds, where even a 2-point shock costs under 1%. A bond sleeve you will hold for a decade can carry aggregate-level duration and treat rate swings as noise on the way to the yield. Long-duration funds (10y+, duration ~13) are a deliberate bet on falling rates or a hedge against equity-crushing recessions — run the −2 pp scenario here and you will see both the +26% appeal and the −26% risk of getting it wrong. What the calculator cannot see: credit risk (corporate spreads widen in stress, adding losses the duration maths does not predict), currency risk in non-euro bond funds, and the fact that fund durations drift as holdings roll. Check your fund’s current modified duration on its factsheet rather than assuming the presets. Assumes a parallel yield shift and constant duration; figures are estimates, not financial advice.
These numbers make more sense with the guide
The free 12-page Starter Kit turns them into decisions: your first fund, a safe broker, and the tax basics for your country.
Frequently asked questions
Q: Where do I find my bond ETF’s modified duration?
A: On the fund page or factsheet of the provider (iShares, Vanguard, Xtrackers, Amundi all publish it), usually labelled ‘modified duration’ or ‘effective duration’ in years. Enter it via the Custom option here — it drifts over time, so check the current figure rather than an old factsheet.
Q: Is the duration formula exact?
A: No — it is a first-order approximation that assumes a small, parallel shift in yields. Convexity means actual losses are somewhat smaller and gains somewhat larger than the formula suggests, with the gap growing beyond roughly ±1 percentage point. For sizing decisions it is accurate enough; for pricing individual bonds it is not.
Q: If rates rise, is my loss permanent?
A: Only if you sell. The fund’s yield rises with the market, coupons reinvest at better rates, and the loss is recovered in approximately duration years. That makes duration your break-even horizon: hold longer than the fund’s duration and a rate rise eventually leaves you ahead.
Q: Why did bond ETFs fall so much in 2022 if bonds are ‘safe’?
A: Because duration risk was unusually high and yields started near zero. Aggregate funds carried durations around 7 with almost no yield cushion, so a ~2 point rise produced 15%+ losses — exactly what −duration × rate change predicts. ‘Safe’ in bonds means predictable if held to the horizon, not immune to price swings.
Q: Does this work for rate cuts too?
A: Yes, symmetrically: a duration-13 long-government fund gains roughly +13% on a −1 point move, which is why long-duration funds are the classic way to position for falling rates. The trade-off is that the same lever produces equally large losses if rates rise instead.