Yardeni Sees Bond Vigilantes Mustering as US, UK Prep Debt Sales

Wall Street veteran Ed Yardeni says the approaching US election could augur the return of the market’s bond vigilantes as the Treasury Department readies new debt issuance plans.

It’s a call the founder of Yardeni Research Inc., who famously coined the phrase in the 1980s to describe investors selling bonds to set the US government back on a course of fiscal restraint, has made before.

“It’s a conceivable scenario that the bond vigilantes are definitely mounting up,” Yardeni told Bloomberg Television on Monday. “There’s no discussion by either candidate about doing anything to reduce the deficit to deal with the debt, to deal with the exploding net interest expense of the government.”

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In August 2023, he heralded their return once again, by October longer-date Treasury yields had reached multi-year highs. But then, almost as quickly as they rose, yields plunged — with the 10-year all the way back down to near 4%. The benchmark Treasury rate is higher so far in 2024, although below those recent peaks.

Yardeni’s comments come ahead of a slate of debt issuance in the coming weeks in both the US and UK that will leave markets to digest the new supply.

On Wednesday, the Treasury will release its so-called quarterly refunding statement, an outline of borrowing plans for the three months ahead. Since May, the department has said it expects to keep note and bond auction sizes at the same size “for at least the next several quarters” — with some auction sizes already at a record level. Wall Street dealers expect the refunding auctions will total $125 billion for the third quarter in a row.