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). It has happened during Reagan’s term and throughout history, and it seems like they are back!

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 policy.

Pre-Requisites (these episodes are other pieces of the puzzle you need to know):

64. How the Credit Market Influences Your Interest Rates

52. Introduction to Bonds

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 Takeaways and Important Concepts:

* A treasury is a “fixed-income product” commonly referred to as bonds.

* Companies can issue stock to raise capital (money), and they can also issue debt in the form of a fixed-income product. You lend them money and they pay you back with interest.

* Governments can also issue debt from the Treasury, which funds are very large country deficit (debt, kinda like credit card debt). And that’s how the government can get more money for fiscal policy.

* Bonds are traded second-hand on the secondary market just like stocks.

* Bonds and Yields (interest) have an inverse relationship, they 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 teacher-learner style by a 15-year finance expert, Jessica Inskip, to her very inquisitive beginner investor friend, Jessie DeNuit. We want to help you get better with your “finance-sis” (get it? No finance bros here). Our mission is to demystify the stock market and make financial literacy accessible to all self-directed investors! We believe that investing is for everyone and that's why we break down complex investing topics - from "Her" perspective. You’ll also learn about free tools and resources on our podcast and we offer a ton of free educational content on our ⁠website⁠ so you can become fin-fluent. (Beware of imposters trying to scam you into crypto or out of your money - we would never do that.)

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