bonds go up interest rates
If current interest rates were to rise, giving newly issued bonds a yield of 10%, then the zero-coupon bond yielding 5.26% would not only be less attractive, it wouldn't be in demand at all.n this instance, the bond's price would drop from $950 (which gives a 5.26% yield) to $909 (which gives a 10% yield). Now that we have an idea of how a bond's price moves in relation to interest-rate changes, it's easy to see why a bond's price would increase if prevailing interest rates were to drop.