Market MakeHer Podcast 65. Bond Vigilantes Are So Back
What is a bond vigilante? The Batman of the bond market? Kinda. In the last episode, we learned the bond market is the most powerful and influential market. Bond vigilantes are big-time bond investors who can use the power of selling bonds to influence the market and protest against fiscal and monetary policy (basically, they try to put restraints on the government from over-spending and over-borrowing, especially when inflation is high).
What do bond vigilantes do?
When bond vigilantes sell significant amounts of their bonds, they drive bond prices down and yields up, making it more expensive for debt issuers (companies or governments) to borrow money. They do this to get someone’s attention when they don’t agree with fiscal or monetary policy.
Pre-Requisites (these episodes are other pieces of the puzzle you need to know):
64. How the Credit Market Influences Your Interest Rates
29. Investment Risk Tolerance (the Risk Pyramid)
18. Understand The Yield Curve…
6. The Fed (who they are & how they work) - this one has good episode equity too
Key Concepts:
* A treasury is a “fixed-income product” commonly known as bonds.
* Companies can issue debt in the form of bonds.
* Governments also issue debt from the Treasury, which funds our large country deficit (or debt, kinda like credit card debt). And that’s how the government can get more money for fiscal policy.
* Bonds and Yields (interest) move opposite of each other.
* Rising bond yields = higher borrowing costs = higher mortgage rates, credit card rates, and borrowing costs for all of us.
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Market MakeHer is an investing education podcast taught by a 15-year finance expert to her friend, a beginner investor. Our mission is to demystify the stock market and make financial literacy accessible to all self-directed investors! We teach complex investing topics in a different way - from "Her" perspective.
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