What does an increase in interest rates typically signify for long-term bonds?

An increase in interest rates typically leads to a decrease in the value of long-term bonds. This relationship is primarily due to the fixed nature of bond payments. When interest rates rise, newly issued bonds come to market with higher yields, making existing bonds with lower interest rates less attractive. As a result, the prices of existing bonds decline to align their yields with the new market rates.

Investors looking for better returns on their investments will prefer new bonds that offer higher interest rates. Thus, to sell a long-term bond that pays a lower rate, bondholders must reduce its price, which leads to a decreased value in the bond market. This inverse relationship between interest rates and bond values is a fundamental principle in fixed-income investing.