These discussions always bring back memories from one of my MBA corporate finance classes. At least half the class could not get over the concept that when rates rise, the bonds they already bought will fall in value on the resale market, but will still yield the same and return their principal if held to maturity. The professor spent a whole day mathematically illustrating the point and fielding arguments.
So
@TodayOhBoy the confusion you're feeling is perfectly natural!
I'll tell a story to illustrate the point:
1) Suppose bonds sell for $1,000 each. At the end of the bond's term, bondholders get their $1k back.
2) Suppose the yield being offered changes over time.
3) Suppose you buy a 10-year bond for $1,000 at a time when bonds yield 3%. You'll be paid $30 a year, in 2 installments, for the next ten years. Along with your last interest payment, the issuer gives you back your $1,000.
4) Next year, your 10-year bond is a 9-year bond. It's still paying a "coupon" of 3% per year compared to your original investment.
5) However, by next year rates have changed. Now anyone can buy 9-year bonds on the open market yielding 6%. The new bonds' coupon is $60/year, which is higher than the $30/year you're earning.
6) You'd rather earn 6% than 3% so you put your bond on the market for the original $1,000 you paid. NOBODY will buy your bond. Why would they, when they too would rather earn 6% than 3%?
7) So you start cutting the price. You start with $10 off, move on to $25 off, chop $100 off... and so on. Still nobody will buy your bond. You get desperate and keep cutting, vowing to sell that low-yielding bond at whatever price possible so you can get that 6% yield!!!
8) Eventually somebody buys your 9-year bond with a $30/year coupon for $793.70.
9) You buy a bond yielding 6%.
10) Then you realize what happened. From the perspective of the person who paid $793.70, the bond you sold has a 6% yield to maturity, because at the end of 9 years they'll make a profit from getting back the original $1,000 you invested, plus they'll collect all those smaller coupons in the meantime. They purchased your old low-yielding bond because the price had been cut to the point the yield to maturity equaled the yield they could get from buying any other similar bond from anybody else. You merely sold a 6% yielding bond to buy another 6% yielding bond!
----------------------
In this story, you experienced a capital loss of (1000-793.70=) $206.30, or 20.6%, not counting the $30 in coupons received for holding the bond a year.
However, you didn't really gain or lose compared to your initial position because the $793.70 was put to work in a new 6%-yielding bond. This is less money than you originally had invested, but it's earning a bigger coupon every 6 months. The return in nominal dollar terms will equal the return had you held the original bond with the 3% coupon. That's why the other person was willing to buy your old bond. It was essentially the same deal as they could get anywhere else in the market.
Your bond sold for the price it did because the present value of the future cash flows was the same as it would be if your buyer had chosen instead to get a brand new bond with a 6% coupon. It was merely a tradeoff between getting bigger coupon payments or getting a bigger return of principal in the end.
See this bond calculator:
https://www.omnicalculator.com/finance/bond-price