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It's not that bizarre. They used some instruments to achieve some level of "risk"/growth/income under the assumption that the government wouldn't do something incredibly risky and stupid. It may have been a perfectly sensible and safe thing to do in the past. Unfortunately a pair of morons decided to do something unprecedented without allowing anyone to look at the impacts beforehand.
frankenbike
t.o.
There's the tradable value of the bond, and the yield provided to the bond holder from government. The yield went up, and the tradable value went down due to the market being flooded with bonds.
So if they weren't engaging in funny business with derivatives, they'd have been given more free money from government (for index-linked bonds, at least). But they had to sell them at a reduced price in order to pay their creditors.
The whole thing is bizarre, frankly.