\u201cInvestors\u2019 concerns include an unsustainable American fiscal position, rising inflation risk and a growing uncertainty about war,\u201d he added, as the 2-year yield topped 4.0% this week, while the 10-year yield shot above 4.4%.<\/p>\n
The MOVE index that tracks volatility in the Treasury market has spiked to levels consistent with price instability and policy dysfunction, Brusuelas noted.<\/p>\n
If uncertainty continues, it could trigger broader funding stress in debt markets that were already under pressure from worries about private credit, he predicted.<\/p>\n
The warning highlights the role of \u201cbond vigilantes,\u201d a term coined by Wall Street veteran Ed Yardeni<\/a>\u00a0in the 1980s, referring to traders who protested huge deficits by selling off bonds to push yields higher.<\/p>\n Previous selloffs have reined in presidents, including Trump, who pulled back on his trade war last year after the bond market turned \u201cyippy.\u201d\u00a0With the U.S. now in an actual shooting war, bond vigilantes could throw their weight around again.<\/p>\n \u201cThe need for additional spending to finance the war would increase U.S. debt, sparking a bond market selloff as investors require additional compensation to cover potential losses,\u201d Brusuelas said. \u201cLong-term rates such as 30-year mortgage rates are based in part on the benchmark U.S. 10-year yield. Most important: The bond market remains undefeated.\u201d<\/p>\n At the same time, the Iran war has now entered its fifth week, with some analysts predicting it could drag on into the fall or even next year<\/a>. <\/p>\n That\u2019s as the conflict widens to Iranian allies in Iraq and Yemen, while Persian Gulf neighbors edge closer to taking direct military action against the regime, which is targeting their economic infrastructure.<\/p>\n Thousands of U.S. Marines and paratroopers are also on their way to the Middle East, while the White House reportedly weighs deploying another 10,000 troops for a potential ground assault in Iran to reopen the Strait of Hormuz.<\/p>\n A prolonged war that boosts borrowing costs would come as the federal government must refinance $10 trillion of debt that is coming due in the next 12 months, while the budget deficit is already on pace to hit $2 trillion, according to Apollo Chief Economist Torsten Slok. <\/p>\n But the government also faces more competition for bond investors\u2019 dollars. He previously warned<\/a>\u00a0the flood of corporate debt could make borrowing more expensive for the administration, and that\u2019s exactly what happened<\/a> earlier this month during the single busiest day on record for U.S. corporate bond sales.<\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/03\/Screenshot-2026-03-28-at-10101-PM-e1774728140473.png\"\/)
<\/p>\n