The looming clash between Trump and the bond vigilantes

The bond market can be so intimidating that in the 1980s, economist Ed Yardeni dubbed these outraged investors the “bond vigilantes” for their role in preserving law and order in capital markets if government officials won’t.

In early 1993, President Bill Clinton looked to push through the economic stimulus package he had touted on the campaign trail. But those promises were stopped dead in their tracks by a formidable opponent: the bond market. Clinton was forced to abandon much of the economic plan and shift focus to fixing the budget rather than risk skyrocketing interest rates that would tank the economy. That episode demonstrated the power of the bond market to check policies that investors disagree with –– even ones championed by a president emboldened by a political triumph. Clinton political adviser James Carville famously said at the time: “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.” The bond market can be so intimidating that in the 1980s, economist Ed Yardeni dubbed these outraged investors the “bond vigilantes” for their role in preserving law and order in capital markets if government officials won’t.