One-liner
Duration is basically how sensitive a bond's price is to a move in interest rates. It tracks the time to maturity and the schedule of payments.
- Long duration (steep)
- Short duration (gentle)
Why it matters
Long duration is powerful, for better and worse. A long fixed-income bond can swing as much as the stock market. If you do not want the swings, short duration is the bet, usually at a lower yield, which is the price of predictability.
Analogy
A long seesaw. A small push at one end (a rate move) sends the far end (the price) flying; a short seesaw barely moves. The market takes its view of the bond, good or bad, and multiplies it by the duration.
The catch
A 'safe' government bond is only safe at maturity. In between you feel the good and bad moods of the market, and the longer the duration, the bigger the jolt when rates move, in your favor or against you.