SignalFrogA bond is a loan with a fixed coupon and a fixed repayment date. Hold it to maturity and, provided the borrower pays, you get exactly what was agreed at the start. The price in between still matters — it decides what you get if you have to sell early.
The mechanism in one sentence
When market rates rise, newly issued bonds become more attractive. The older bond with the lower coupon must fall in price until its yield matches the new situation. That is why rates and bond prices move in opposite directions.
Why maturity changes everything
The effect grows with the remaining term. On a bond with two years left the disadvantage is quickly over. On twenty years it applies for twenty years — and the price falls accordingly further.
This explains 2022. When central banks raised rates sharply in a short time, long-dated government bonds lost double digits. For many investors that was the surprise of the decade: the part of the portfolio considered safe fell at the same time as the equity part.
What follows
For the portion that must be available at short notice, short maturities are the instrument of choice — the rate effect is small there.
Long maturities are a bet on falling rates. That can be taken deliberately. It should simply not happen by accident because a fund has the word "safe" in its name.