CNBC International Live Sep 18, 2026
With Ed Yardeni, President of Yardeni Research
When Ed Yardeni coined the phrase bond vigilantes in 1983, the federal deficit they were worried about ran at $250 billion a year. It now runs at $1.5 trillion to $2 trillion, in an economy that on his account does not need the help.
The usual reading of a 10-year yield at 5% is that investors want paying for inflation risk. Yardeni's reading is fiscal, and his test of whether the Treasury is winning the argument is the yield itself.
"Unfortunately, based on what the bond yield is doing, he hasn't done a very good job because here we are requiring 5% in order to get people to buy the bond."
Yardeni named the phrase in 1983 and runs Yardeni Research, and he came with the specific mechanism the Treasury has left and the 2023 precedent for using it.
The full segment is covered here so you can skip it.
Here are the 4 calls that matter.
Key Takeaways
Yardeni reads the yen intervention as a Treasury defense, done so Japan would stop selling US government bonds
The Treasury secretary has called himself the top bond salesman in the country, and Yardeni measures the job by the 5% yield
The remaining tool is buying back long bonds and funding it with Treasury bills, which Janet Yellen did on a smaller scale in 2023
The deficit that first stirred the bond vigilantes was $250B a year, against $1.5T to $2T now
Higher-for-longer oil prices will reach core inflation through second and third order effects
1. Betting Against the House
The host asked whether the Treasury secretary doubles down on trying to bring down yields on longer-dated maturities or gives up on it. Yardeni said the choice is genuinely hard.
It is a hard call either way
Well, it's a tough call really.
Ed Yardeni
Bessent's own framing, as Yardeni relayed it, is that the government is the house and nobody should bet against the house.
The casino version of the argument
I think he's taken the position that as he said, he is the house. In other words, you don't want to bet against the house.
Ed Yardeni
But doing nothing costs credibility too
But at the same time, if he doesn't do anything, then he risks losing even more credibility.
Ed Yardeni
Yardeni's reading of the intervention on behalf of the yen is that it was never about the yen.
The yen was defended to protect the Treasury market
So, I think he's kind of gotten into the fray and I think by intervening on behalf of the yen, everybody knows the reason he did that is so that the Japanese wouldn't be selling US Treasuries.
Ed Yardeni
He has called himself the country's top bond salesman
He has previously said that he's the number one bond salesman in the United States.
Ed Yardeni
And the yield is how Yardeni scores that
Unfortunately, based on what the bond yield is doing, he hasn't done a very good job because here we are requiring 5% in order to get people to buy the bond.
Ed Yardeni
2. The Bazooka in the Toolkit
Yardeni said he does not know what the Treasury will do next, but he named the one large instrument left: buying back long-dated bonds and paying for it by issuing short-dated bills instead.
The remaining instrument is a funding swap
There is a bazooka in his toolkit. And the bazooka is to buy back a lot more bonds and finance them in the Treasury bill market.
Ed Yardeni
There is a precedent, at smaller scale
It's kind of what Janet Yellen did back in November 1st of 2023, but it would have to be more substantial and it would be riskier if it didn't work.
Ed Yardeni
3. Vigilantes Since 1983
The host put the national debt at $40 trillion and asked whether the continuing sell-off is the bond market's verdict on it.
The host's number was $40T of debt
We've got the national debt at $40 trillion. Is that what the bond market is telling us in so far as this sell-off is continuing?
A host
Yardeni answered by measuring the change against the deficit that produced the phrase in the first place.
He named the vigilantes in 1983
Yeah, well, I coined the expression bond vigilantes back in 1983.
Ed Yardeni
The deficit then ran at $250B a year
And back then, the bond vigilantes were concerned about a government budget deficit at an annual rate of 250 billion dollars.
Ed Yardeni
Now it is six to eight times that, in a good economy
Now we're running one and a half to two trillion dollars when the economy doesn't really need it.
Ed Yardeni
The textbook says the opposite
You're supposed to be running deficits when the economy is in a recession. When the economy is doing well, you're supposed to be running surpluses at least in theory.
Ed Yardeni
And the textbook is not what decides it
But theory is not relevant here. Politics is what's relevant and as a result of that the bond vigilantes certainly stirring here.
Ed Yardeni
They are getting ready to ride
Maybe even saddling up showing that they're not happy with what's going on on the fiscal side.
Ed Yardeni
4. Oil Feeds Core Inflation
The second complaint he attributed to the bond market is about prices rather than borrowing.
They also expect inflation to stick
They're not happy with the fact that inflationary pressures may persist.
Ed Yardeni
Because oil looks higher for longer
Looks as though we're going to have higher for longer oil prices and that being the case, that's bound to have second and third order effects on core inflation.
Ed Yardeni
Bonus Insights
A buyback would cut across the Fed
Yes, and at cross purposes perhaps with the Fed too.
A host
The host's point is that the Treasury buying back long bonds to hold yields down would work against a central bank trying to keep policy tight.
Yardeni's bottom line is that the 5% yield is a fiscal verdict rather than an inflation one, and that the only large tool the Treasury has left, swapping long bonds for bills, is riskier than the version tried in 2023.
Products, Companies & Tools Mentioned
Yardeni Research (Yardeni's firm; he coined the phrase bond vigilantes there in 1983 and still tracks the deficit against it)
The US Treasury (Whose remaining option, on Yardeni's account, is buying back long bonds and funding the purchases in the bill market)
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