"Bond investors are the economy's bond vigilantes. ... So if the fiscal and monetary authorities won’t regulate the economy, the bond investors will. The economy will be run by vigilantes in the credit markets.” – Ed Yardeni, 1983
"I used to think that if there was reincarnation, I wanted to come back as the President or the Pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody." – James Carville, 1993
The Bond Vigilantes have struck again. As far as we can tell, at least with respect to US financial markets, they are the only 1.000 hitters in history. Even though the Stock Vigilantes were clearly telling President Donald Trump that his tariff policy was misguided late last week, his advisers touted falling oil prices and bond yields as ultimately helping Main Street America. That changed as the 10-year Treasury yield surged 34 bps from below 4.0% on Friday to nearly 4.34% today (chart).
After ratcheting back all reciprocal tariffs to 10% for at least 90 days (and upping the pressure on China to a greater than 100% tariff), Trump said today: "I was watching the bond market. The bond market is very tricky, I was watching it. But if you look at it now it's beautiful. The bond market right now is beautiful…. I saw last night where people were getting a little queasy." Trump also said he listened to JPMorgan CEO Jamie Dimon's interview this morning with Fox's Maria Bartiromo, where Dimon said a recession was likely and the bond market was sending bad signals about stress in the financial plumbing.
