For the market participants owning bonds, collecting coupons and holding it till maturity, market volatility is not a matter to ponder over. The principal and interest rates are pre-determined for them.

However, participants who trade bonds before maturity face many risks, including the most important one – changes in interest rates. When interest rates increase, the bond-value falls. Therefore, changes in bond prices are inversely proportional to the changes in interest rates.

Economic indicators and paring with actual data usually contribute to market volatility. Only little price movement is seen after the release of “in-line” data. When economic release does not match the consensus view, a rapid price movement is seen in the market. Uncertainty is responsible for more volatility.