—Why countries stoking inequality are inherently risky

Opinion by Mathew Carr

Bond markets contain progressive policy in the UK by preventing govt borrowing and encouraging austerity.

The markets’ man in office — Starmer — is probably about to lose his job.

Therefore the bond traders think it’s ok /logical to charge the UK govt higher interest rates.

I disagree. Countries controlled democratically by the people should be seen as MORE stable. Not less stable.

Countries stoking inequality are inherently risky.

Unequal countries and those with bad legal systems will be increasingly avoided by investors. The UK legal system is biased towards protecting the rich, instead of everyone equally. Look how it abused Julian Assange.

The people need to speed their taking back of control.….yet also show they aren’t reckless, economically.

Markets are scared of Angela Rayner’s progressive policies: (Bloomberg reporting via radio)

Six-month view

One-week view

One-day view

Highest yields since 1998 (Bloomberg)

Gemini unchecked

It was indeed the man who coined the term: Ed Yardeni, President of Yardeni Research.
He joined Bloomberg Surveillance this morning to discuss the recent resurgence of “bond vigilantes”—a term he famously first used in 1983 to describe bond investors who “police” government spending by selling off debt and driving up yields when they perceive fiscal or monetary policy to be inflationary.

Highlights from the Discussion

• The 2026 Context: Yardeni noted that the “vigilantes” have been particularly active lately due to the volatility surrounding U.S. trade policies and the fiscal implications of the ongoing geopolitical tensions.
• Market Discipline: He argued that the recent spike in Treasury yields serves as a market-driven check on government spending, similar to the “Great Bond Massacre” of the 1990s.
• Recent Precedent: The conversation touched on how these market forces were credited with influencing the administration’s tariff decisions back in April, proving that the vigilantes are “back in the saddle.”

Who are the “Bond Vigilantes”?

The term was coined by Yardeni during the Reagan administration to describe how the bond market could essentially “intimidate” a government into fiscal discipline. As Yardeni famously put it, if the government doesn’t behave, the vigilantes will drive up the cost of borrowing until they do.

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UK vigilantes in the frame?

Exactly. In his interview on Bloomberg Surveillance this morning, Yardeni made that specific distinction.
While he acknowledged that the U.S. “Bond Vigilantes” are certainly watching—particularly given the deficit implications of recent tax incentives—he argued they are currently far more “proactive” in Japan and the UK.

Why the Focus on Japan and the UK?

Yardeni pointed to a few key reasons for this geographical shift in market pressure:

• Japan’s Debt Crisis: He noted that Japan’s “vigilantes” are effectively revolting as the Bank of Japan struggles to normalize policy while inflation stays stubbornly above their 2\% target. With yields soaring in Tokyo, he described it as a “clear message” to the government about the lack of fiscal discipline.
• The UK’s Gilt Market: Yardeni referenced the UK’s recent history (recalling the 2022 mini-budget crisis) as a permanent reminder of how fast the vigilantes can move. He suggested that the current UK fiscal environment is under much tighter market scrutiny than the US right now.
• The US “Yield Curve Control”: Interestingly, he argued that the US vigilantes are slightly more subdued because the Treasury has been aggressive in managing the supply of long-dated debt—essentially practicing a form of “stealth” yield-curve control that keeps the vigilantes from fully taking charge.

The “Global Mobilization”

Yardeni’s broader point this morning was that we are seeing a “Global Mobilization” of these actors. He believes that while the US might be “oversold” at the front end of the curve, the real fireworks are happening abroad where governments are facing more immediate pressure to fund defense spending and energy transitions amidst the ongoing Middle East instability.

Note: He also mentioned that he’s monitoring “private credit” as the next potential frontier where these market forces might start demanding higher premiums if the current “Roaring 2020s” scenario hits a snag.

(Updated with Bloomberg, earlier with how bond markets should recognise inequality in their thinking when setting appropriate yield, not just austerity, or fiscal-cost control and discipline.)