[Toddsterpatriot]

In my example, a European investor who was looking to earn $400 in U.S. dollars was willing to pay $10,000 (in its Euro equivalent) five years ago to get that return. Today, he's only willing to pay $6,500 to get that same return. His "coupon" is still the same in both cases (4%), but the price (in his own currency) that he's willing to pay for that coupon is 35% lower today than it was five years ago.

Yes, he lost $3500 since he bought the bond. He's still earning 4%. If he wanted to earn more, he should sell now.

Right now Uncle Sam is paying a fixed "dividend"

New bonds go on sale all the time. And the coupon is still low. For now.

[Alberta's Child]

Yes, he lost $3500 since he bought the bond. He's still earning 4%.

Right. He's willing to accept a low coupon because he's paying a discounted rate on a new bond. His old bond isn't the same as the new bond (in his mind) even if the coupon is the same . . . because he paid $10,000 for the old one but only $6,500 for the new one.