What The Heck Is A Bond Vigilante?
No one really knows...
Can’t we all just get along?
A bond vigilante is a bond market investor who protests against monetary or fiscal policies considered inflationary by selling bonds, thus increasing yields.
In the bond market, prices move inversely to yields. When investors perceive that inflation risk or credit risk is rising they demand higher yields to compensate for the added risk.
As a result, bond prices fall and yields rise, which increases the net cost of borrowing.
The term refers to the (alleged) ability of the bond market to serve as a restraint on the government's ability to over-spend and over-borrow.
Some ‘Gurus’ have suggested the spike in the 10-year yield has been due to aggressive selling by China.
Some ‘Non-Gurus’ like me would ask ‘Why would China purposely reduce the price of the country’s greatest asset?’
Other ‘Non-Gurus’ like me would point to the fact that the 10-year yield is exactly where it was just two short weeks ago.
They might also point out that the 10-year yield is down almost 10% since January.
They may even consider that rates are coming down because international investors are regaining confidence the in US Economy.
Hmmm…
Sometimes, Non-Gurus Know More Than The Gurus.
Sorry ILTB, fat finger problem.
I am down on 10 year US bond etf (ITLB) bought more or less equal amounts every quarter over the last year. Basically all down 6%. Being a non guru myself I dont understand why they are down so much. I have other higher risk bonds which are down about the same.