The bond market is seeing trouble. Why investors are buying now anyway.

The 10-year Treasury note has just recorded its worst five-year return in more than a century, according to Goldman Sachs. That statistic captures the unusual nature of the current bond market: a sustained stretch in which rising yields have eroded the total return of an asset class long associated with stability and income.

Why, then, are investors still buying? The answer lies in the distinction between price and yield. When bond prices fall, yields rise, and new buyers lock in higher coupon payments than they could have earned for most of the past decade. For long-horizon investors, that reset can improve expected returns even after a painful run.

What to watch: the path of inflation and central bank policy, since both drive the direction of yields. Also watch the shape of the yield curve, which can signal shifting growth expectations. The recent record is backward-looking; whether bonds regain their traditional role depends on what comes next.