The bond market has struggled through a prolonged selloff. Rising yields moved beyond government debt into mortgage bonds and other credit markets. That spread deepened losses in Treasurys, creating a cycle that pressured prices.
Wall Street now sees that cycle nearing its end. The link between mortgage-backed securities and government bonds amplified selling. Once those spillovers fade, the market can stabilize.
Yields climbed as investors demanded higher returns. Mortgage rates followed, weighing on housing demand. Corporate borrowing costs also rose, cooling issuance.
That chain reaction became self-reinforcing. Weakness in one sector pushed yields higher elsewhere. Treasurys absorbed the fallout, extending the selloff.
Recent signals suggest the worst may be over. Buyers have stepped back into mortgage bonds at attractive levels. That demand helps break the feedback loop.
Treasury yields have also found firmer footing. Investors are reassessing how far the Federal Reserve will keep rates elevated. Expectations for peak rates have shifted.
A calmer mortgage market supports broader credit conditions. When spreads narrow, borrowing costs ease for households and businesses. That relief can ripple across the economy.
Risks remain. Inflation data or Fed guidance could reignite volatility. But for now, the reprieve looks real.
The bond market is not fully healed. Still, the conditions that fueled the selloff are weakening. That shift offers room for recovery.
Investors should watch mortgage spreads and Treasury auctions. Both will show whether the calm holds.
