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Tags: ed yardeni | bond | vigilantes | rates

Ed Yardeni: 'Bond Vigilantes' Ready to Push Rates Higher

(Andre Lefrancois/Dreamstime)

By    |   Monday, 12 February 2018 08:38 AM EST

Wall Street veteran Ed Yardeni warns savvy investors that “bond vigilantes” are saddled up again and ready to push interest rates higher.

Yardeni, also a Newsmax Finance Insider, coined the term "bond vigilantes" in the 1980s to refer to investors who sell their holdings in an effort to enforce fiscal discipline.

"They had been sort of put under lock and key by the central banks," Yardeni told CNBC.

"The Fed had lowered interest rates down to zero in terms of short-term rates and that pushed bond yields down. And then they bought up a lot of these bond yields," said Yardeni, president of Yardeni Research.

"Now people are looking more at the domestic situation and saying, 'You know what, maybe we need a higher bond yield,'" Yardeni said in an interview with "Power Lunch."

"They've saddled up, and they're riding high. The posse is getting ready. They're getting the message out."

A higher Friday close for New York stocks following a week of “vol” induced selling, lifted markets in Asia and Europe, helping MSCI’s all-country index rise off four-month lows, while European shares firmed 1.4 percent after touching six-month troughs last week.

Wall Street’s equity volatility gauge, the VIX - the spike in which had kicked off the ructions - was at 26.5 percent, easing off Friday’s 29 percent close.

While the index had rocketed to 50 at the height of last week’s turmoil, current levels are well above the long-term average around 11 percent, in a sign that investors’ nerves are still jangling.

Meanwhile, world shares climbed half a percent on Monday, attempting to brush off fresh rises in global bond yields while equity futures also pointed to a firmer session on Wall Street which suffered its worst week in two years, Reuters explained.

“People are nervous after the shock of the past week but it doesn’t feel like there is a crisis around the corner. But never say never,” said Grant Lewis, head of research at Daiwa Capital Markets in London.

Given solid world economic growth, Lewis said the falls were more likely a wobble than a full-blown correction to the nine-year long equity bull market as bond investors priced in an improved economic outlook.

“Even at 2.90 percent, 10-year Treasury yields are still low,” he added.

And many other experts are much more optimistic.

The nation's economy is very strong, and the tax cut bill is energizing business, so the stock markets will be "just fine," despite record drops this past week, economic analyst Larry Kudlow told Newsmax TV Friday, and he'd buy and hold stocks as they grow cheaper.

"Investment profits are very strong," Kudlow, the Reagan administration economist who also advised President Donald Trump's campaign, told "Newsmax Now" guest host Kirsten Haglund.

There is some interest rate turbulence as well, he continued, but "people shouldn't panic," said the radio host of "The Larry Kudlow Show."

"Stocks are gonna be cheaper and I'd buy them as they go down," said Kudlow, a Newsmax Finance Insider.

(Newsmax wire services contributed to this report).

© 2024 Newsmax Finance. All rights reserved.

Wall Street veteran Ed Yardeni warns savvy investors that “bond vigilantes” are saddled up again and ready to push interest rates higher.
ed yardeni, bond, vigilantes, rates
Monday, 12 February 2018 08:38 AM
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