No. of Recommendations: 0's a really basic question about the relationship between "interest rates" and bond-fund returns.

A report on a intermediate-term bond fund on Morningstar uses the following phrases: in March-April of 2004 the entire bond market was hit by rising interest rates and so investors had negative returns. But INTEREST RATES SOON FELL boosting returns for the entire year.

Now, what interest rates are these that fell in the latter part of the year?

So far as I understand, the prime rate set by the FOMC has only been slowly rising for the past 18 months. And if the report refers to the auction price (face value) of government bonds/notes, is it correct to call that "interest rate"? Isn't what falls when the auction price rises actually the yield?
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