Nigel Green, CEO of global financial advisory firm deVere Group, warns that “bond vigilantes” are back, signaling significant costs for equity markets. deVere Group provides global wealth management and financial planning solutions to international clients. His comments come as 30-year US government borrowing costs climb to levels unseen since 2007, pushing stocks lower and forcing investors to reprice risk. Green contends these market forces, quiet for a period, are now “reawakening,” fuelled by long-dated yields persisting above 5%, oil prices surging past US$85, and stubborn inflation.
The US Treasury market has dramatically expanded from US$4.5 trillion in 2007 to over US$31 trillion, with federal debt exceeding 100% of the economy and annual interest payments surpassing US$1 trillion. This leads investors to price in risks of unchecked government spending. Rising oil prices, driven by renewed geopolitical tensions, are ill-timed, reigniting inflation worries as rate cut expectations were pared back. Green argues this makes the inflation fight harder for the Federal Reserve, potentially eroding its credibility. Additionally, a surge in corporate borrowing for AI infrastructure competes directly with government issuance for buyers, increasing capital costs.
Should yields continue to climb, Green outlines three critical consequences. Firstly, equity valuations, especially in expensive market segments, will face direct pressure. Secondly, governments must choose between fiscal discipline and materially higher borrowing costs. Thirdly, currencies and emerging markets will absorb spillover as capital chases the highest safe yield globally. Green advises investors not to await a definitive signal, asserting that current conditions—near two-decade high 30-year yields, climbing oil, and massive government borrowing—are clear warning signs requiring swift portfolio adjustments.
