Bond markets are showing renewed activism against governments with heavy borrowing, pushing up yields in major economies like the UK, France, and the US. Investors are demanding higher returns as government debt burdens rise due to pandemic-era spending and fears of future fiscal irresponsibility.
Bond markets have entered a new era of antagonism with governments, fund managers say, as investors sell sovereign debt in big economies such as the UK, France and the US amid a deluge of borrowing. The UK’s heavy-borrowing budget in October has triggered sell-offs in the gilt market, pushing the 10-year yield to its highest level since 2008 and 30-year interest costs to the most this century.
Usually bond investors provide a “low rumbling in the background” of policymaking, but events in the UK and France have demonstrated how they have begun to increase the pressure, LaRusse added. “They are going to tell governments they are pushing things too far.” The sell-offs have led to comparisons with so-called “bond vigilantes” — a group of investors that drove changes in US fiscal policy in the 1990s by forcing yields higher but which has more recently been dormant.
Economics Bond Markets Government Debt Fiscal Discipline Sovereign Borrowing Inflation Interest Rates
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