Why can reinvestment risk dominate price risk?

Higher rates reduce the current value of the bond, but they also increase the rate earned on future coupon reinvestment. If the investor's horizon is long, the reinvested coupons may compound for enough periods to offset or exceed the initial price loss.

This is why Macaulay duration matters for horizon analysis. Around Macaulay duration, the two effects can approximately offset for small parallel yield shifts. For horizons longer than Macaulay duration, reinvestment effects can become the dominant force.