Bond Vigilantes a Factor in Europe But Not in the U.S.

Thirty years ago, economist Edward Yardeni coined the term “bond vigilantes” to describe investors who seek to sway a country’s fiscal policies by selling off its sovereign bonds. Over the past four years, those bond vigilantes have proven to be pivotal actors in the European debt crisis. Things couldn’t be more different in the United States where, according to Yardeni, the Fed’s policy of holding down interest rates has “all but destroyed” bond markets, making it next to impossible for vigilantes to ply their trade.