Forced sellers US bond rout - the belly of the beast

Adam posted on Thursday on the tumultuous selling in US bonds:

• Another bloodbath in stocks as belly burnout hits bonds

With:

• "There's also very good argument that convexity hedging in the mortgage market combined with dealer selling after the auction is responsible for a good chunk of this move."

Bloomberg have a piece up on the ...

• The forced sellers are investors in the $7 trillion mortgage-backed bond market.

In (VERY) brief:

• when Treasury yields suddenly rise sharply ... mortgage-bond investors are left waiting for longer to collect payments on their investments
• The longer the wait, the more financial pain they feel
• Their answer: unload the Treasury bonds they hold with long maturities or adjust derivatives positions -- a phenomenon known as convexity hedging

Check out that link above (this one: forced sellers) for more detail.