No worries: I am ignorant too, and presently I am not an ardent follower of the bond market either (although I do find it a useful reference for relative value analysis purposes).
In no particular order, here is a non-exhaustive list of possible reasons for the ongoing bond selloff:
1) Expectations of the Fed hiking the Fed-fund rate faster than previously guided.
2) Expectations on the impact of global central banks (Fed, ECB, BOJ, etc.) unwinding their balance sheets (selling out of existing bond holdings) or tapering their residual planned bond purchases.
3) Rumours of China slowing down (or stopping) their purchases of US Treasury bonds
4) Momentum traders (hedge funds, predominantly, in synthetic format via swaps and futures) playing the breaking to the upside of some multi-year downward-sloping channels in USD, EUR and JPY long-term yields.
I am not aware of any large bondholders (such as sovereign wealth funds or fixed-income funds) rebalancing out of bonds; when that happens, the yield curve generally steepens (as a consequence of “duration reduction”, i.e. selling of the more long-dated bonds and buying of the front end), but right now the opposite is happening.
Note that, if we decompose long-term yields into their real yield and break-even inflation components, it is the inflation component that is currently driving the selloff; that is to say, inflation expectations are on the rise, whereas real yields are still close to their recent lows.
Hope this helps, let me know if there is anything unclear.
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)