Bonds are fixed income instruments, like RBI Floating Rate Bonds. These are issued for a fixed rate of interest which can be sold in the secondary market by opening a demat account or using the existing demat account.
The value of a bond in the secondary market is decided by its price and its yield. The price of a bond is the cost of purchasing it and the yield is the actual returns that are expected if the bond is held till maturity. It is to be noted that a bond's yield falls when the prices are rising and conversely, if the price of the bonds fall, it indicates a rise in yield. This is because when the interest rate on Government bonds fall, the older bonds become more expensive since they were sold at a higher interest rate scenario, with a higher coupon. The investors who are holding the older bonds can then charge a premium to sell them. This sale is done in the secondary markets.
In the converse case, when the interest rate rises, all older bonds become cheaper as the coupon is lower on them. These older bonds can then be sold in the secondary market at a discount.