"If interest rates go up 2%, those bonds will decline about 12%"
This is simply not a true statement. For instance, did this fund decline by about 12% the last time interest rates went up 2%? Or how about: Did this fund decline by about 6% the last time interest rates went up 1%?
For Vanguard Total Bond Market Index Fund Investor Shares (VBMFX), Vanguard says:
Average effective maturity 8.1 years
Average duration 5.8 years
"The longer the average maturity, the more a fund's share price will move up or down in response to changes in interest rates."
A measure of the sensitivity of bond—and bond mutual fund—prices to interest rate movements. For example, if a bond has a duration of two years, its price would fall about 2% when interest rates rose one percentage point."
According to this, if rates go up 2% the price will fall about 2 * 5.8% = 11.6%. Which is about 12%.
If you think this is wrong, take it up with them.