Fixed income markets experiencing supply-demand imbalance

The sell-off in fixed income markets is influenced by a change in the supply-demand dynamics. Two years ago, the Fed was a major buyer of Treasury and mortgage-backed securities, while other buyer bases, such as overseas and domestic banks, had large positions in fixed income. However, with the Fed's quantitative tightening program and various cohorts in the rates universe reducing their holdings, the fixed income market is currently experiencing a supply-demand imbalance. The market is awaiting a more balanced positioning perspective and a catalyst for lower rates, which may come into play when slower economic growth is observed.