WSJ: The Return of the Bond Vigilantes

Posted by Kendall Harmon

They're back. We refer to the global investors once known as the bond vigilantes, who demanded higher Treasury bond yields from the late 1970s through the 1990s whenever inflation fears popped up, and as a result disciplined U.S. policy makers. The vigilantes vanished earlier this decade amid the credit mania, but they appear to be returning with a vengeance now that Congress and the Federal Reserve have flooded the world with dollars to beat the recession.

Treasury yields leapt again yesterday at the long end, with the 10-year note climbing above 3.7%, its highest close since November. Treasury yields had stayed low, and the dollar had remained strong, as long as investors were looking for the safest financial port amid the post-September panic. But as risk aversion subsides, and investors return to corporate bonds and other assets, investors are now calculating the risks of renewed dollar inflation.

They have cause to be worried, given Washington's astonishing bet on fiscal and monetary reflation. The Obama Administration's epic spending spree means the Treasury will have to float trillions of dollars in new debt in the next two or three years alone....

Read it all.

Filed under: * Economics, PoliticsEconomyCredit MarketsThe 2009 Obama Administration Bank Bailout PlanThe 2009 Obama Administration Housing Amelioration PlanThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--The Fiscal Stimulus Package of 2009The Possibility of a Bailout for the U.S. Auto IndustryThe U.S. GovernmentBudgetThe National DeficitThe United States Currency (Dollar etc)Treasury Secretary Timothy GeithnerPolitics in GeneralOffice of the PresidentPresident Barack Obama

0 Comments
Posted May 29, 2009 at 12:02 am [Printer Friendly] [Print w/ comments]
Registered members must log in to comment.




Next entry (above): From the Morning Scripture Readings

Previous entry (below): CNN: Roman Catholic Priest who broke celibacy vow joins Episcopal Church

Return to blog homepage

Return to Mobile view (headlines)