If interest rates go way up, do short term bond funds take as big a hit as long term bond funds?

Question

If interest rates go way up, do short term bond funds take as big a hit as long term bond funds?

Answer 1

No. Longer term bonds are more affected because you are due to receive more coupon payments (longer duration = more pmts). If rates go up, your outstanding bond is paying lower coupons than the market and will be worth less. If you had a short term bond that only had a few coupons left, the price would drop slightly, whereas if you had a 10-30 year bond with many coupon pmts left the bond is much less attractive because there are many coupons left which are lower than the market.

Answer 2

The last guys answer was almost correct.

Unfortunately almost all bond funds, unless it is a term fund have no maturity to it.  Ie.. it is perpetual and will not mature.  

You asked if rates go way up?  Which rates?  It could be that the yield curve will flatten out, meaning when the fed raises the rates, short term rates go up faster than long term rates. This would have an opposite affect to none.  Perception in the bond funds means liquidations can occur when people believe they could lose money.

When people believe that short term bond funds are safer and they see there principal eroding, they are the first people to exit quickly, causing a domino effect on price an (hit) as you call it.

So in reality it can not be answered in a straight yes or no, the variables are the market conditions, whether the yield curve flattens or steepens, and the publics perception of there funds to lose money will dictate which has a bigger hit at that time.