U.S. Treasury yields are nearing 6%—why are more people selling as prices drop? On October 7, the 30-year U.S. Treasury yield briefly hit 5.706%, marking a new high since 2002. Some of you might think, with yields this high, is it time to buy long-term bonds? But Bassman warns that if the 20-year yield breaks 6%, some institutions might actually need to accelerate selling. The issue lies in the delivery rules for Treasury futures. Sellers can choose the cheapest-to-deliver bond from a basket of Treasuries, based on a conversion formula pegged to a 6% yield. As market rates rise, the bond most suitable for delivery might shift to longer maturities, which are more sensitive to interest rate changes. In his October 13 report, Bassman calculated that the duration of the relevant delivery bonds has already increased from around 11 to 13.24, and further shifts could push it above 17. In plain terms, fund managers might not add to their positions, but the same rate movement could lead to bigger gains or losses. For institutions with risk limits, increased sensitivity could force them to reduce positions or add hedges. As yields climb, some institutions may need to sell more, and the added selling pressure could push yields even higher. This is how negative convexity can amplify declines. Bassman estimates that the extra rate risk from further shifts is equivalent to the Treasury issuing about $110 billion more in 20-year bonds over four months. Leverage could amplify this process. Many funds borrow money to buy Treasury cash bonds while selling futures to capture the small spread between the two. If volatility increases, margin requirements rise, or financing becomes harder, these funds might sell cash bonds and buy back futures to unwind trades—turning their original bond purchases into selling pressure. The key point here is that institutions can remain bullish on long-term bonds but may have to sell due to risk limits or cash needs. Being willing to wait for yields to drop doesn’t mean they have the ability to wait indefinitely. Silicon Valley Bank faced a similar issue back in the day. The impact could spill beyond the bond market. Persistently high long-term rates could make corporate debt issuance, refinancing, and residential mortgages more expensive. Even if the Fed doesn’t hike rates further, the market might tighten financing conditions on its own. High valuations in U.S. equities would require stronger profit support, and bitcoin:native could also face selling pressure as institutions reduce risk and shore up cash. So, while higher yields might make long-term allocations more attractive, short-term prices will depend on how concentrated the selling pressure is and how much buying power is available to absorb it. One @Gate, trade more markets.