Markets bite back: Bond Vigilantes vs US policies

"Bond Vigilantes" refer to market forces in the bond market that spontaneously correct governments' improper, irrational, and anti-market policies. When authorities implement misguided measures, investors respond by selling government bonds, driving up yields and increasing financing costs for governments. This serves as a powerful warning signal to compel policy adjustments and restore market confidence. The concept was first coined by economist Ed Yardeni in the 1980s.

Following the Trump administration's "Liberation Day" tariffs, among all existing constraint mechanisms observed to date, the swiftest and most forceful reaction emerged almost instinctively from these "Bond Vigilantes" in the US treasury market. Their actions effectively drew red lines against unreasonable and abnormal policies.

At its core, the "Bond Vigilantes "mechanism represents a form of market self-regulation. It demonstrates real-time price feedback from bond assets to misguided policies, embodying characteristics of "spontaneous order". This phenomenon reveals that even when confronting state power, markets retain certain "autonomy" and "disciplinary capabilities".