There are reasons to do it, though not very good ones.
Basically, it discourages copy and pasting. This means users are less likely to forget it on their clipboard and have it accidentally leaked. Also if they are pasting it, it means they have it saved somewhere (like a text file), which is not as secure as their brain - so if the text file becomes useless, maybe they'll rely on their memory more.
Of course these don't actually make sense. A lot of people who copy and paste are doing so from their password manager, which is very well protected. Password managers automatically clear the clipboard as well, and as pointed out elsewhere, what are the odds that your user got a keylogger that can read the clipboard but not the key presses?
To me, things like this reveal a kind of contempt for the user's intelligence. It's basically saying, "you are too dumb to not get your password stolen, you are too dumb to follow simple security guidelines, we are just going to strap this baby harness on you to protect you from yourself". Nevermind that when your login details are stolen, it's far more likely to be because of a data breach on the server side, rather than some clipboard leak on the client side. I try to avoid such sites if at all possible, since they make me think I'm not the right audience for the site.
Luckily many password managers these days are starting to just emulate key presses instead of straight up pasting, so in the end the joke's on them.