So, interest rates, both in New Zealand and globally are very, very low – both in absolute terms and by historical standards. Low interest rates help stimulate economic activity and because of economic growth concerns and Covid slowdowns, central banks around the world have actively forced interest rates lower. So, what happens is that the price of our 0.5 per cent bond has to fall until it is providing the same overall return as the 1.5 per cent bond. This would mean a fall of about 3 per cent in the value of our 0.5 per cent bond. Specialist bond funds are also feeling the pressure – just surveying websites of some New Zealand-based bond funds shows falls in recent months of over 5 per cent for some funds.

Source: Stuff March 14, 2021 15:56 UTC