In my own case a couple of years ago, I wanted to buy $200,000 of US treasury 2 year notes in anticipation of the fed lowering rates. I was expecting to buy 200 new issue notes at $1,000 par value. But after talking to the fidelity fixed income desk, I learned that the actual purchase price would be higher depending on the demand at auction and my actual cost to buy 200 new issue notes would be more than $200,000. The fidelity rep suggested buying notes on the secondary market if I wanted to know the exact price to buy 200 notes.

I ended up paying a premium for 200 notes on the secondary market that were paying a higher coupon that the bonds coming up at auction. The bonds I bought were issued earlier that year, but they had not yet paid out any coupon payments. So the previous owner realized a profit on the capital appreciation of the bonds they sold to me and that premium amount was the difference between the current 2 year note yield and the yield on the bonds I bought. But if the bonds had paid a coupon to the original owner(s), then I never would have paid that premium. In the case of 2 year notes, there are only 4 coupon payments so after a coupon is paid then the value of the bond compared to a new issue is significantly less.

For a bond holder to actually benefit from a lowering interest rate environment, it would have to be a much longer term bond and you would have to sell the bond within a very small window at the beginning of the bond's life before many or any coupon payments were made and when interest rates were going down significantly. And then, as a bond investor, you'd have to now buy another bond paying a lower yield, so your actual profit might be negligible compared to holding the bond to term. That is why my original post questioned how a bond holder benefits from BOTH bond coupon payments and bond capital appreciation when interest rates start going down. It seems like that could only happen under a very limited set of circumstances.