Joe Biden’s disastrous performance in last week’s US presidential debate is bringing the so-called “bond vigilantes” off the market’s sidelines that they have occupied for more than a decade and a half.
The increased likelihood that Donald Trump will regain the presidency – a prospect fuelled by Biden’s feeble display and by this week’s controversial US Supreme Court ruling on presidential immunity – has seen bond yields spike and the yield curve steepen, with the yields on longer-term bonds rising more than those at the short end of the curve.
The yield on two-year treasuries has only edged up from 4.71 per cent to 4.74 per cent, but the yield on 10-year bonds has jumped from 4.29 per cent ahead of the debate to 4.43 per cent, having touched 4.46 per cent on Monday.
A steepening yield curve indicates that bond investors anticipate higher inflation and higher interest rates in …