Close Menu
Invest Intellect
    Facebook X (Twitter) Instagram
    Invest Intellect
    Facebook X (Twitter) Instagram Pinterest
    • Home
    • Commodities
    • Cryptocurrency
    • Fintech
    • Investments
    • Precious Metal
    • Property
    • Stock Market
    Invest Intellect
    Home»Investments»US debt crisis: bond vigilantes are voting in this election too
    Investments

    US debt crisis: bond vigilantes are voting in this election too

    October 26, 20244 Mins Read


    Suburban moms, crypto bros, and Swifties aren’t the only voters making their presence felt this election season. Bond investors are voting with their dollars in financial markets, and they don’t like what they see.

    The term “bond vigilantes” was famous coined by Wall Street veteran Ed Yardeni in the 1980s, referring to traders who protested massive deficits by selling off bonds to push yields higher. 

    In a note published Wednesday, Yardeni, who is president of Yardeni Research, and Eric Wallerstein, the firm’s chief markets strategist, wrote that the vigilantes are voting early and pointed to the 10-year Treasury yield soaring by 63 basis points to 4.25% since the Federal Reserve announced a half-point rate cut at its meeting last month.

    “In exit polls, the Bond Vigilantes are saying they are voting against Fed Chair Jerome Powell’s dovish monetary policy because the economy is running hot, and the Fed’s premature 50bps rate cut on September 18 raises the risk that it will overheat,” they said.

    Treasury yields tumbled ahead of the first rate cut as investors looked for an aggressive easing cycle to match the aggressive tightening cycle. Since the Fed meeting, however, they’ve staged a big reversal.

    Sentiment has turned so much that some Wall Street forecasters have warned that the central bank may even pause on further cuts. That’s as Fed officials and economic data have dampened optimism for lots of easing.

    In their note, Yardeni and Wallerstein also attributed recent market moves to the outlook for federal deficits, which have ballooned recently and hit $950 billion in the fiscal year that ended Sept. 30, up 35% from the prior year due mostly to higher rates.

    “The Bond Vigilantes may also be voting against Washington, figuring that no matter which party wins the White House and the Congress, fiscal policies will bloat the already bloated federal government budget deficit and heat up inflation,” they explained. “The next administration will face net interest outlays of over $1 trillion on the ballooning federal debt.” 

    Budget watchdogs have warned on the exploding federal deficit. While it will expand under either Donald Trump or Kamala Harris, the Penn Wharton Budget Model and the Committee for a Responsible Federal Budget have said Trump’s policies would produce a much deeper hole.

    That’s as the former president has teased a range of tax cuts and even eliminating income taxes altogether. Meanwhile, his vow to hike tariffs across the board is also widely seen as inflationary because companies typically pass along the added costs to consumers in the form of higher prices.

    With Trump gaining in the polls, his policies that are expected to stoke inflation and widen deficits are increasingly getting priced in the bond market, which sees more upward pressure on Fed rates and yields as a flood of fresh Treasury bonds will cause investors to demand higher returns.

    In addition to the spike in Treasury yields, Yardeni and Wallerstein highlighted other developments in financial markets, including higher federal funds futures, rising inflation views via the 10-year TIPS rate, the stronger dollar, and gold’s 33% year-to-date surge.

    Gold has emerged as an attractive hedge against rising inflation, profligate fiscal policies, and geopolitical instability.

    “Investors are buying up precious metals to protect their portfolios from all the above risks,” they wrote. “The foreign central banks of the Axis of Evil are building their gold reserves to skirt potential financial sanctions in the future.”

    While bond vigilantes had appeared to be dormant for years, especially as the Fed kept rates low, Yardeni said last year that they were back and “saddling up” again with federal deficits on their agenda.

    Despite Wall Street heavyweights like JPMorgan CEO Jamie Dimon sounding the alarm on U.S. deficits and debt, neither Trump nor Harris has made it a priority on the campaign trail. That may give bond vigilantes a bigger voice on the issue.

    The perceived power of bond vigilantes was famously illustrated in the early 1990s, when US yields jumped as investors dumped Treasurys amid fears about federal deficits in what became known as the Great Bond Massacre.

    James Carville, who was an adviser to President Bill Clinton at the time, mused that he would like to be reincarnated as the bond market: “You can intimidate everyone.”



    Source link

    Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

    Related Posts

    Portable Retirement Gratuity Fund : 7,936 dossiers toujours en attente

    Investments

    Salt Investments finalise l’acquisition de 60 % des parts de TT Oil

    Investments

    ‘A firm I’ve never heard of has contacted me about old investments’

    Investments

    Pension investments: Six steps to follow when looking at your retirement savings

    Investments

    Selon un récent dépôt auprès de la SEC, Sei Investments Insider a vendu des actions pour une valeur de 12 006 823 dollars.

    Investments

    Un actionnaire de Skechers poursuit le fabricant de chaussures pour obtenir des détails sur le rachat de 9,4 milliards de dollars par 3G

    Investments
    Leave A Reply Cancel Reply

    Top Picks
    Property

    Why does it take 70% longer to sell a UK home than a …

    Commodities

    commodity and currency check, 21 October

    Precious Metal

    Gold, silver price today, October 14, 2024: Precious metals witness dip on MCX

    Editors Picks

    Bond set at $10K for former Columbia school safety officer

    August 28, 2024

    Here are the major investments above ₹500 crore promised to the state- The Week

    February 23, 2025

    Olympic swimmer shocks world by announcing her retirement from swimming aged 20 in emotional interview

    July 29, 2024

    Trematon Capital Investments Limited annonce ses résultats pour le semestre clos le 28 février 2025

    April 9, 2025
    What's Hot

    Oil price continues to drop amidst growing ceasefire hope, demand concerns | Commodities

    July 23, 2024

    Kahleah Copper’s Olympic performance was nothing new for the Mercury

    August 14, 2024

    China’s bond market intervention reveals financial stability worries – NBC 6 South Florida

    August 15, 2024
    Our Picks

    Property damage from Hurricane Helene could cost owners more than $47 billion

    October 7, 2024

    United Utilities price target lowered to 1,150 GBp from 1,200 GBp at Deutsche Bank

    January 21, 2025

    the role of tree plantation

    July 12, 2024
    Weekly Top

    La fintech Chime vise une valorisation de 9,5 milliards de dollars lors de son introduction en Bourse aux États-Unis

    June 2, 2025

    Bihar has tremendous potential for agricultural development: Shivraj Singh Chouhan | India News

    June 2, 2025

    Un groupe de métal indonésien portant le hijab se produit au Japon

    June 2, 2025
    Editor's Pick

    Green Street Expands Private Market Coverage with European Self-Storage Data and Analytics

    May 19, 2025

    North East property market defies national trends as new builds rise by 33%

    May 6, 2025

    Osisko Development uncovers 90.2 g/t gold and 226.33 g/t silver at Tintic project

    August 7, 2024
    © 2025 Invest Intellect
    • Contact us
    • Privacy Policy
    • Terms and Conditions

    Type above and press Enter to search. Press Esc to cancel.