Understanding the Global Bond Market Selloff
Long-term interest rates have risen sharply across major global markets in recent weeks as government bond prices have fallen and yields have moved higher. The move has been broad, with long-term borrowing costs in the U.S., UK, Germany, France and Japan reaching levels not seen in years or even decades.
Unlike the 2022 selloff, however, today’s move is not simply a story of central bank tightening. We believe it reflects a broader shift in the supply and demand for long-duration debt, as issuance has increased while the marginal buyer has become increasingly price-sensitive.
Five Forces Behind Rising Long-Term Yields
- More supply of long-term debt. Government deficits and record AI-related corporate borrowing have both driven a surge in long-duration bond issuance, adding to what the market must absorb.
- A shift in who is buying. Pension funds and central banks, once reliable buyers regardless of price, have stepped back. Price-sensitive buyers such as mutual funds, hedge funds, and insurers have taken their place, and yields have had to rise to meet their return requirements.
- Persistent inflation. Inflation has stayed above the Federal Reserve’s 2% target for more than five years, and investors are demanding extra compensation for that ongoing risk.1
- Less central bank support.Q uantitative easing, which held rates artificially low through the 2010s, has largely ended, leaving the market to find its own clearing levels.
- Country-specific pressure in France and the UK. Political fragmentation and heavy foreign debt ownership weigh on France, while the UK faces difficult fiscal tradeoffs and a structural decline in the pension demand that once anchored its bond market.
Why This Differs From 2022
2022 was driven by rapid Fed rate hikes to combat 9% inflation.2 We believe today’s move is better understood as the unwinding of the low-rate 2010s regime, as quantitative easing, light bond supply, and steady structural demand all reverse at once. Even strong sovereign borrowers like Germany have felt the impact.
Implications for Structured Credit
Rising rates can create refinancing risk for weaker borrowers, particularly in commercial mortgage-backed securities, but they can also create dispersion and opportunity for disciplined security selection. We believe the key is distinguishing securities repricing simply because of higher rates from those facing genuine collateral deterioration.
Our approach favors seasoned, de-levered commercial mortgage-backed positions that have built meaningful credit support over time. These often trade at a discount to par, where price moves driven by rate volatility, rather than weakening fundamentals, can support forward returns.
What We’re Watching
Fundamentals: refinancing conditions for maturing commercial real estate loans, delinquency trends across consumer credit tiers, and residential mortgage loan performance.
Technicals: how new issuance is absorbed by the market, spread dispersion across collateral types, and the spread relationship between investment grade and non-investment grade tranches as a read on risk appetite.
The Bottom Line
We believe the sell-off reflects a genuine structural shift, not a short-term dislocation. It can carry risk for weaker credits, but it can also create real opportunity for portfolio managers equipped to tell the difference through disciplined, fundamentals-driven selection.
Learn more about the Easterly Orange Structured Credit Strategy
IMPORTANT INFORMATION
© 2026. Easterly Asset Management. All rights reserved.
As of June 30, 2026, Easterly Asset Management and its Strategic Partners had $3.7B in managed assets which includes nearly $3.5B in assets under management and administration of Easterly Investment Partners LLC, an SEC registered investment adviser. Easterly Snow and Easterly Ranger are investment teams of Easterly Investment Partners LLC. EAB Investment Group LLC (d/b/a Easterly EAB) and Orange Investment Advisors LLC (d/b/a Easterly Orange) are separate SEC-registered investment advisers that are strategic partners of Easterly. Each investment adviser’s Form ADV is available at www.sec.gov. Registration does not imply and should not be interpreted to imply any particular level of skill or expertise.
The material contains information regarding the investment approach described herein and is not a complete description of the investment objectives, risks, policies, guidelines or portfolio management and research that supports this investment approach. Any decision to engage the Firm should be based upon a review of the terms of the prospectus, offering documents or investment management agreement, as applicable, and the specific investment objectives, policies and guidelines that apply under the terms of such agreement. There is no guarantee investment objectives will be met. The investment process may change over time. The characteristics set forth are intended as a general illustration of some of the criteria the strategy team considers in selecting securities for client portfolios. Client portfolios are managed according to mutually agreed upon investment guidelines. No investment strategy or risk management techniques can guarantee returns or eliminate risk in any market environment. All information in this communication has been obtained from sources believed to be reliable but cannot be guaranteed. Investment products are not FDIC insured and may lose value.
Investments are subject to market risk, including the loss of principal. Nothing in this material constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate. The information contained herein does not consider any investor’s investment objectives, particular needs, or financial situation and the investment strategies described may not be suitable for all investors. Individual investment decisions should be discussed with a personal financial advisor.
Any opinions, projections and estimates constitute the judgment of the portfolio managers as of the date of this material, may not align with the Firm’s opinion or trading strategies, and may differ from other research analysts’ opinions and investment outlook. The information herein is subject to change without notice and may be superseded by subsequent market events or for other reasons. Easterly assumes no obligation to update the information herein.
AReferences to securities, transactions or holdings should not be considered a recommendation to purchase or sell a particular security and there is no assurance that, as of the date of publication, the securities remain in the portfolio. Additionally, it is noted that the securities or transactions referenced do not represent all of the securities purchased, sold or recommended during the period referenced and there is no guarantee as to the future profitability of the securities identified and discussed herein. As a reminder, investment return and principal value will fluctuate.
This communication may contain forward-looking statements, which reflect the views of Easterly and/or its affiliates. These forward-looking statements can be identified by reference to words such as “believe”, “expect”, “potential”, “continue”, “may”, “will”, “should”, “seek”, “approximately”, “predict”, “intend”, “plan”, “estimate”, “anticipate” or other comparable words. These forward-looking statements or other predications or assumptions are subject to various risks, uncertainties, and assumptions. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Should any assumptions underlying the forward-looking statements contained herein prove to be incorrect, the actual outcome or results may differ materially from outcomes or results projected in these statements. Easterly does not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by applicable law or regulation.
Past performance is not indicative of future results.
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Learn more about the Easterly Orange Income Opportunities Fund (JSVIX, I Share)
RISKS & DISCLOSURES
Investors should carefully consider the investment objectives, risks, charges and expenses of the Fund. This and other important information about the Fund is contained in the prospectus which should be read carefully before investing. To obtain a prospectus or summary prospectus which contains this and other information, visit funds.easterlyam.com or call Easterly Securities LLC at 888-814-8180. Performance data quoted represents past performance. Past performance is not indicative of future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. All results are historical and assume the reinvestment of dividends and capital gains. Performance shown reflects contractual fee waivers. Without such waivers, total returns would be reduced. Please click here to view standardized performance for the Fund.
The Easterly funds are distributed by Easterly Securities LLC, member FINRA/SIPC. Easterly Investment Partners LLC is an affiliate of Easterly Securities LLC. Orange Investment Advisers, LLC and EAB Investment Group, LLC are not affiliated with Easterly Securities LLC.
Easterly Investment Partners LLC is the investment adviser to the Easterly mutual funds. Easterly Snow and Easterly Ranger are investment teams of Easterly Investment Partners LLC, an SEC-registered investment adviser. EAB Investment Group LLC (d/b/a Easterly EAB), Orange Investment Advisors LLC (d/b/a Easterly Orange), and Lateral Investment Management are separate SEC-registered investment advisers that are strategic partners of Easterly. Each investment adviser’s Form ADV is available at www.sec.gov. Registration does not imply and should not be interpreted to imply any particular level of skill or expertise.
Not FDIC Insured-No Bank Guarantee-May Lose Value.
This commentary represents the views of the author as of the date published and is subject to change without notice. The information provided is for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security.
Diversification does not guarantee a profit nor protect against loss in any market.
The derivatives that the Fund primarily expects to use include options, futures and swaps. Derivatives may be volatile and some derivatives have the potential for loss that is greater than the Fund’s initial investment. The liquidity of the futures market depends on participants entering into offsetting transactions rather than making or taking delivery. High yield, below investment grade and unrated high risk debt securities (which also may be known as “junk bonds”) may present additional risks because these securities may be less liquid, and therefore more difficult to value accurately and sell at an advantageous price or time, present more credit risk than investment grade bonds and may be subject to greater risk of default. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise; conversely, bond prices generally rise as interest rates fall. There is no guarantee that the investment techniques and risk analysis used by the portfolio managers will produce the desired results. MBS and ABS have different risk characteristics than traditional debt securities. Credit spread risk is the risk that credit spreads (i.e., the difference in yield between securities that is due to differences in their credit quality) may increase when the market believes that bonds generally have a greater risk of default.
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