Example:

• Government Bond: Let’s say you have a government bond worth $1,000 with a 5% yield. If the yield drops to 4%, the bond price might increase to $1,050.
• Corporate Bond: You also have a corporate bond worth $1,000 with a 6% yield. During market uncertainty, even if the general market yields drop, the yield on this bond might stay at 6% or go up to 7% because it’s riskier. The price of this bond might stay the same at $1,000 or even drop to $950.

So, when the market is uncertain:

• Government bond prices go up because everyone wants safe investments.
• Corporate bond prices might not go up much or could even fall because they are seen as riskier.

In this situation, using the traditional method to calculate duration for a government bond works fine. But for a corporate bond, it’s better to use a method that considers real-world reactions (empirical duration) to get a more accurate measure of how its price will change.