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?

Recommended

Margin call
Glossary

Margin call

When an investor borrows to bet on markets, they put down a deposit known as “margin”.
2 Apr 2021
Resource curse
Glossary

Resource curse

The term “resource curse” refers to the observation that countries with abundant natural resources also tend to be less economically developed than th…
14 Jan 2021
Balance of payments
Glossary

Balance of payments

The balance of payments refers to the accounts that sum up a country's financial position relative to other countries.
8 Jan 2021
Yield-curve control
Glossary

Yield-curve control

Yield-curve control is when a central bank aims to control long-term interest rates by pledging to buy (or sell) as many long-term bonds as needed to …
25 Dec 2020

Most Popular

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?
Bitcoin

Central banks are rushing to build digital currencies. What are they, and what do they mean for you?

As bitcoin continues to soar in value, many of the world’s central banks are looking to emulate it by issuing their own digital currencies. But centra…
8 Apr 2021
House prices: from boom to even bigger boom
House prices

House prices: from boom to even bigger boom

UK house prices have risen to new to record highs, says Nicole Garcia Merida. Demand continues to outpace supply, but continued low interest rates, th…
9 Apr 2021
Nuclear power might never be popular – but now looks a good time to invest
Commodities

Nuclear power might never be popular – but now looks a good time to invest

Nuclear power gets a very bad press, but it is the ultimate renewable energy source. Interest in it is perking up again, says John Stepek. Which means…
9 Apr 2021