Since March of this year, the US bond market has been under continuous pressure, with US Treasury yields generally fluctuating upwards. A sharp jump occurred at the end of September, and bond prices continued to decline. Entering October, market volatility intensified further, with 10-year and 30-year US Treasury yields hitting 24-year highs, and the market as a whole trapped in a selling cycle. The persistently rising bond yields have significantly disrupted various capital markets, lengthening the effective duration of mainstream debt securities such as mortgage-backed securities and Treasury futures. The longer the duration of debt instruments, the higher the interest rate volatility risk faced by investors, triggering a concentrated sell-off of long-term US Treasuries, creating a vicious cycle of "rising yields—increased duration risk—intensified selling—continued yield increases." However, after a sustained sharp decline, the severely damaged US Treasury market has finally found a respite. The momentum of the multiple factors suppressing the bond market has gradually dissipated, the pace of selling has slowed significantly, the upward trend in yields has been curbed, and the bond market has begun to show signs of stabilization and rebound. Core Causes of the Decline: Two Hedging Actions Fuel a Selling Cycle The core driving force behind this round of sustained selling of US Treasuries comes from the combined effect of hedging operations in the mortgage-backed securities market and rebalancing in Treasury futures, which is also the key cause of this vicious cycle in the bond market. One aspect is the chain reaction of mortgage-backed securities. The continued rise in market interest rates has significantly reduced homeowners' willingness to refinance their mortgages, passively lengthening the expected maturity of the underlying loans in mortgage-backed securities, thus extending the bond duration. To hedge the interest rate risk brought about by duration expansion, institutions holding these bonds need to hedge portfolio risk through derivative contracts. Counterparties, in order to match derivative positions, will sell off government bonds in a concentrated manner, further suppressing government bond prices and pushing up yields. Another factor is the impact of conversion risk in government bond futures. 15- to 25-year government bond futures contracts will switch underlying bonds according to yield fluctuations. If yields rise to 6%, the underlying bonds will be changed from government bonds maturing in 2045 to longer-term bonds. To manage risk in advance, investors are reducing their futures positions and selling off physical government bonds, further amplifying market selling pressure and exacerbating bond market volatility. Key driver of stabilization: Multiple negative factors gradually subside. The current bond market is experiencing a respite, primarily because the technical and trading factors that previously drove the sell-off are gradually fading, and market logic is gradually returning to fundamentals. Many market institutions and analysts point out that the current technical rally in yields is nearing its end. First, the duration extension space for mortgage-backed securities is approaching its limit. After continuous adjustments, the duration expansion of mortgage-backed securities has limited room for further significant increases, leading to a substantial cooling of hedging demand from holding institutions and a corresponding reduction in Treasury bond sales. Barclays analysts explicitly stated that the driving force behind mortgage-backed bond hedging operations pushing up Treasury yields is no longer sustainable. Secondly, selling pressure from Treasury futures rebalancing is gradually easing. Goldman Sachs analysis points out that asset managers have proactively managed duration risk in recent months, completing most futures rebalancing operations ahead of schedule. The selling pressure from Treasury futures conversion risks has been largely released, and the related negative impact continues to weaken. Furthermore, market supply and demand and policy expectations have seen marginal improvement. This week's auction demand for new US 10-year Treasury bonds was exceptionally strong, directly pushing up yields rapidly. Simultaneously, Federal Reserve officials have released a series of dovish signals, clearly indicating a pause in rate hikes this month, correcting the market's previously overly aggressive rate hike expectations—the market had previously bet on four rate hikes by the end of July next year. The cooling of interest rate expectations has further eased pressure on the bond market. Market data confirms the stabilization trend. As of Thursday's close, the 10-year US Treasury yield fell to 5.232%, a significant drop from the intraday high of 5.365%. Furthermore, the bond market rebound was led by long-term Treasury bonds, completely reversing the previous weak pattern of "stable short-term yields and continuous sharp declines in long-term yields." Market Divergence: Remaining Technical Risk Exposure Remains Debatable Despite the bond market's recovery, there is still significant disagreement regarding whether technical selling pressure has been fully cleared. Some institutions believe that the market has fully absorbed the risks of Treasury futures conversion, investors have completed their portfolio adjustments in advance, and subsequent technical selling pressure has largely subsided. The bond market will gradually be driven by fundamentals, with core factors such as oil prices and inflation replacing trading behavior as the key to yield trends. However, other institutions hold a cautious attitude. Morgan Stanley strategists pointed out that asset management institutions tend to be cautious and often do not make significant adjustments to their holdings in advance. The peak of hedging operations corresponding to duration extension has likely not yet arrived, and potential selling pressure still exists. Technical risk exposure has not yet been fully cleared. Market Outlook: Limited Respite, Multiple Risks Remain The current stabilization and rebound in the US Treasury market is more of a temporary respite due to the clearing of technical negative factors, rather than a trend reversal. The market still faces multiple uncertainties and risks. On the macro level, escalating fiscal concerns in Europe, ongoing geopolitical conflicts between the US and Iran, and the potential risk of inflation data exceeding expectations continue to weigh on the bond market. In terms of asset market correlation, this week saw a typical divergence between stocks and bonds: Brent crude oil surged 4.1%, reaching $104.28 per barrel, while the S&P 500 and Nasdaq indices weakened significantly, with only the Dow Jones Industrial Average showing a slight increase. This complex market environment adds uncertainty to the future direction of the bond market. Overall, market sentiment has marginally improved, and some investors have begun to buy bonds on dips, but the overall attitude remains cautious. The pace of increase in US Treasury yields will slow significantly in the short term, with consolidation and correction becoming the main theme. The medium- to long-term trend will still depend on the Fed's monetary policy, inflation trends, and the further resolution of global geopolitical risks.