Right, but the 3 year bond would only pay 3 years of interest. If interest rates are significantly lower 3 years from now, then reinvesting in a new (lower interest) bond at that point would give you a lower return over 5 years than the marginally lower 5 year bond would give you now.

So, why does this happen? Well, it happens when the markets expect interest rates to drop between now and five years from now.

Why might that expectation exist? Well, it might if bond buyers were anticipating a recession.

At least that is how I understand it. Feel free to correct me.