The Federal Reserve's hawkish turn is exposing structural cracks in the bond market as the central bank pulls a historic level of accommodation from the marketplace.

Rocketing inflation has pushed the Fed to tighten financial conditions, raising interest rates and signaling that it will reduce its $9 trillion balance sheet. The Fed provided critical support to the Treasury market during the COVID-19 pandemic, facilitating an explosion in the size of the market from $17.2 trillion to $23.8 trillion.