Bond vigilantes find counterparts in the stock market

Bond vigilantes awaken allies in the stock market


A bond vigilante is a bond market investor who protests monetary or fiscal policies he considers inflationary by selling bonds, thus increasing yields. … As a result, bond prices fall and yields rise, which increases the net cost of borrowing.


Bond vigilantes could be getting allies in the stock market.

With inflation anxieties all over again in vogue and the U.S. budget deficit viewed climing, vigilantes have {targeted|stormed|floaded fixed income trading floors and seem to be surface in equity markets too, where they might penalize already falling apart stocks for policymakers’ and lawmakers’ behaviours.


"The stock market is feeling the bond market’s pain. Absolutely, no doubt – we have stock vigilantes too," said Ed Yardeni,

The label "bond vigilante" was coined by Yardeni in 1983 to explain investors’ appeal to high yields to hedge for the increased risk of inflation and budget deficits at the time of the Reagan administration. A stock version of a vigilante would seek to sway lawmakers and policymakers by hurting equity rates.


Bond yields began to skyrocket on Feb. 2 after U.S. government data exhibited the biggest wage gains since 2009, convincing investors of the growing possibility of inflation, long tame since the 2007-2009 recession.


U.S. stock investors have now turned vulnerable to rising yields after the past week’s upturn, which elevates borrowing costs and could curb economic earnings and progress, Yardeni reported. That also comes against the backdrop of building up government debt.


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