When should I use key rate duration instead of the regular duration number?

Use key rate duration when the risk is tied to one part of the yield curve rather than a uniform shift across maturities.

Example:

• Eastbank Pension Fund owns a bond portfolio with large exposure around the 10-year maturity point.
• The manager expects the 10-year Treasury yield to rise while shorter maturities stay mostly unchanged.

A single portfolio duration number can hide that concentration. Key rate duration isolates how sensitive the portfolio is to the 10-year node specifically.

That makes it better for:

• non-parallel shift analysis
• curve-steepening or flattening scenarios
• hedging a targeted maturity segment

If the question says the entire curve moves together, regular modified duration is more likely to be enough.