I read in a study text that:
- When interest rates are decreasing, investors will migrate their bonds from short- to longer-term ones
- When interest rates are increasing, investors will migrate their bond holdings from longer-term to shorter ones
I don't fully understand why this would be, but I think this would have to be due to risk management and/or an attempt to take advantage of large movements in bond price.
Could anyone shed some light here to help me to understand what the relation between interest rates and bonds?