Bond's Worth
When inflation is up, interest rates go up and when inflation is low, so are interest rates. It's the change in interest rates that causes bond prices to move up or down.
If a government issued bonds offering 6% interest, it seems like a good deal; so you buy some bonds at the par value price of $2000. Two years later, interest rates are up. If new bonds costing $2000 are paying 8% interest, no buyer will pay you $2000 for a bond paying 6%. If you want to sell your bond you'll have to offer it at a discount, or less than you paid. If you must sell, you might have to settle for a price that wipes out most of the interest you've earned.
But if new bonds selling for $2000 offer only a 3% interest rate, you'll be able to sell your 6% bonds for more than you pay. Since buyers will agree to pay more to get a higher interest rate.
