The things that cause bond prices to change can be boiled down to three big things:
How much the interest rates in a country change.
Expectations of change in interest rates.
The creditworthiness of the bond issuer.
Let's take a closer look at each of them.
Interest rates go up or down depending on what a country's central bank does. It regulates interest rates because it wants to control inflation.
When rates go up, people and businesses borrow less and therefore buy less, which can cool down inflation. When rates go down, borrowing and spending usually goes up. This speeds up inflation.
But how does this affect bond prices?
Imagine you got a government bond at 100, set to mature in 3 years, with 5% interest each year. Now, if the central bank unexpectedly raises its rates the day after you buy it, say 2 times higher, the government might soon start offering new bonds for 10% interest. This means you got a bad deal and could have made more with the new bonds.
If you decide to sell this bond, your counterparty will likely demand a discount equivalent to the annual foregone profit multiplied by the years until maturity, i.e., 5% * 3 = 15%. This compensates them for not obtaining a freshly issued bond with double the yield.
If the central bank lowers rates, the opposite happens – the old bonds become worth more.
You should also remember one important rule: if a bond has a longer time to maturity (also called a longer duration), its price will change more when interest rates change. This is clear from the calculations we've looked at. This happens because you have to be compensated for more years of lost income until the bond matures.
To help you understand how interest rate changes affect bond prices, here are a couple of real-life examples: 
Between May 2023 and August 2023, the Turkish central bank raised its policy rate from 8.5% to 17.5%. As a consequence, the price of a 5-year government bond on the chart above plummeted by over 25%.
During the onset of the COVID-19 crisis, the US Federal Reserve reduced its interest rate from 1.75% to 0.25% between late February and late March 2020 to support the US economy. In response, the price of a 5-year US government bond surged by more than 5%.
Bond prices can change even if the central bank hasn't acted yet, just because people expect it might. For example, if folks think inflation is already rising, they might guess the central bank will increase rates. So, they start trading bonds as if rates have already gone up. These changes become more noticeable if someone from the central bank talks about changing rates.
Here's an example:
In the first half of 2022, you could see government bond prices going down in Germany. This happened because people thought the European Central Bank would soon increase interest rates to control rising prices. However, the actual interest rate increase only happened in July 2022.
A bond is like a loan made to a company, government, or other agency. This means that the borrower should have enough money to pay the interest and repay the loan when it's due.
But what if, for some reason, the borrower doesn't have enough money to pay? Then the borrower may default.
Does that mean bondholders get nothing? Usually not. The borrower might make the bond last longer, by agreement with the bondholders, by promising to pay later. Or if the borrower can't pay at all, the bondholders might be able to sell some of the borrower's assets and get some money back.
Moreover, news affecting the issuer's creditworthiness can cause substantial price fluctuations in the traded bonds.
Imagine this: There is an agricultural company that has bonds outstanding. And because of a very bad harvest this year, its revenues are going to fall sharply.
Or it could be good news. For example, it could be a pharmaceutical company that has successfully launched a new drug that could bring them a lot of profits in the future.
In both cases, the news is likely to affect the prices at which these companies' bonds trade. In the first case, investors may think that the company will have a harder time paying its debts. So they would demand a discount on the previous price to compensate for the increased risk. In the second case, the company's prospects may be much brighter because it will have much more money to pay its debts in the future. So it's likely that investors won't be worried about the company's creditworthiness and will be willing to buy bonds even at higher prices than before.
Sometimes the change in credit quality can be very sudden and dramatic, as in the case of Wirecard AG below.
In June 2020, Wirecard AG, which at the time was a large international payment processor based in Germany, announced that almost 2 billion euros in cash were missing from the company's accounts. The sum was equivalent to almost all the profits Wirecard had ever reported. It was the biggest fraud in German history. The price of the company's bond plummeted immediately after the announcement of the missing cash. Investors realized the company was bankrupt and rushed to sell the bond to at least get something back.
________
Also, if you buy bonds denominated in a different country's currency, remember that currency changes can also affect what you get back.
Finally, the nice thing about bonds is that they have a set time until they mature. So, if you hold onto a bond until it matures and the issuer doesn't go bankrupt, you don't have to worry about changes in its price – you'll get the same yield what you expected when you first got the bond.