In this episode of the Planet Money Indicator podcast, the focus is on "bond vigilantes," influential investors who shape government policy through their buying and selling of government bonds. Traditionally, these investors have played a crucial role in controlling inflation by lowering demand for bonds, which raises interest rates, or by selling off bonds, which decreases prices and boosts yields. Their significant bond holdings give them considerable power, directly affecting government borrowing costs. Right now, they are closely monitoring the government's fiscal policies and are ready to act if spending spirals out of control and triggers inflation. A key sign that they might step in would be a sharp drop in demand during Treasury bond auctions.
