How does the interest rate affect bond prices?

Interest rates have an inverse relationship with bond prices. When interest rates go up, bond prices generally go down, and when interest rates go down, bond prices generally go up. This is because when interest rates go up, new bonds are issued with higher yields, making previously issued bonds with lower yields less attractive to investors. As a result, investors may sell their existing bonds, causing the bond prices to decrease. Similarly, when interest rates go down, new bonds are issued with lower yields, making previously issued bonds with higher yields more attractive to investors. This can cause the prices of existing bonds to increase.