Bond Vigilantes Are Mobilizing Globally

The unprecedented oil-supply shock caused by war in the Middle East has crushed investors’ former expectations for subdued inflation and dovish central banks’ actions. The Bond Vigilantes are repricing yield curves worldwide, especially at the short end, in some economies more than others. Today, Dr Ed and our new contributing editor Elias Griepentrog analyze what global yield-curve spreads imply about investors’ new expectations, opining that the front end of the US curve may be oversold. … Also: The three stages of a negative oil-supply shock. The US economy is still in Stage 1, anticipating a more hawkish Fed and a bear-flattening of the yield curve. But where it goes next depends on the course of the war.