Bond vigilantes
"If the fiscal and monetary authorities won't regulate the economy, the bond vigilantes will," says economist Ed Yardeni on Bloomberg...
"If the fiscal and monetary authorities won't regulate the economy, the bond vigilantes will," says economist Ed Yardeni on Bloomberg. 'Bond market vigilantes' is a term he coined in 1984 that can describe any bond-market participant (rather than an elite group of traders or fund managers).
Any bondholder may worry about whether the Federal Reserve has set interest rates too low and allowed the US government to borrow too cheaply to fund spiralling government spending. This may lead to inflation, a particular fear as it erodes a bond's value. If enough bondholders react by selling bonds then yields will tend to rise as prices fall. This makes debt issuance more expensive for heavily indebted governments.
See Tim Bennett's video tutorial: Do we need ratings agencies?
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
-
Review: Eden Roc Cap Cana – fun, sun and golf in the Caribbean
Travel Eden Roc Cap Cana in the Dominican Republic offers everything from relaxing by the pool to a world-class golf course
-
Reeves delays cash ISA reform, but savers are not out of the woods yet
The chancellor has reportedly delayed plans to cut the cash ISA limit, which were set to be announced at Mansion House on 15 July, and will take more time to consult with the industry
-
Margin call
Glossary When an investor borrows to bet on markets, they put down a deposit known as “margin”.
-
Bernanke put
Glossary There is a widespread belief that the US central bank can always rescue the economy by decreasing interest rates. Since the current chairman is Ben Bernanke this is known as the 'Bernanke Put'
-
Greenspan put
Glossary A 'put' is a type of option contract that increases in value as the price of the underlying asset falls.
-
Plaza Accord
Glossary The Plaza Accord was an agreement signed between the US, Japan, West Germany, France and the UK at the Plaza Hotel in New York in 1985.