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 backdrop facing fixed income: a long stretch in which bond prices fell as yields climbed, leaving holders with losses rather than the cushion they historically provided against equity drawdowns.

Yet investors are still buying. That apparent contradiction reflects how bond math works. When yields rise, prices fall — but the higher yields now on offer mean future income is more attractive, and any eventual decline in rates would lift prices from a lower starting point. In other words, today's poor trailing returns are partly what makes the forward case more compelling.

What to watch: the path of inflation and the Federal Reserve's policy rate, since both drive yields. Also worth monitoring is whether the "term premium" — the extra compensation investors demand for holding long-dated debt — keeps widening. For now, the tension between a painful recent record and renewed buying interest is the bond market's central story.