Bloomberg Surveillance TV: September 29th, 2026

SPEAKER_1 (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News.

Jonathan Ferro (0:11)

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferro along with Lisa Abramowicz and Annmarie Hordern. Join us each day for insight from the best in markets, economics and geopolitics. From our global headquarters in New York City, we are live on Bloomberg Television weekday mornings from 6 to 9 a.m. Eastern.

Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always on the Bloomberg Terminal and the Bloomberg Business App. We begin this out with elevated yields, keeping the pressure on equity markets worldwide. Ed Yardeni of Yardeni Research writing, we suspect that the bond market has been hacked by bond vigilante algorithms. They respond to news headlines with huge trades that exacerbate volatility. Ed joins us now for more. Ed, welcome to the program, sir. It's good to see you. Do you believe we might be entering a little bit of a negative feedback loop in the bond market where high yields fuel deficit worries and that fuels high yields? Are we on the brink of that, Ed?

Edward Yardeni (1:03)

I think we aren't on the brink of it. We're sort of in the midst of it.

We've actually seen, I think, since the beginning of the year, a synchronized increase in bond yields. It might actually have started last year. I think a lot of that has to do with what we've previously discussed. The Bank of Japan is raising interest rates and that is causing an unwind of the global carry trade, which I think is affecting global bonds. And so a lot of that is kind of a knee-jerk mechanical event. But at the same time, I think we also have these algorithms that will take any news whatsoever that's out there, and some of that's been bearish, and kind of blow it up so we get these rapid increases in bond yields.

Jonathan Ferro (1:51)

And at what point do you think it becomes self-limiting that the buy steps in because people start to worry about the damage?

Edward Yardeni (1:58)

I think there's already a lot of worry about the damage. People are already kind of wondering what's going to break here. So I think we're already at that point. I think the best way to monitor that is to just keep watching where the bond yield is relative to short-term rates. Usually, you start to get bond yields going up less than short-term rates when bond investors become increasingly convinced that as short-term rates continue to go up, that something will break. And of course, the two-year treasury here and around the world has been a very good leading indicator of what central banks are going to be doing. And right now, the two-year treasuries in all the major countries in the world are pointing towards more tightening by central banks.

So on September 15th, I've kind of concluded that we want to proceed with caution here when it comes to the equity market. Well, it turned out to be actually a good call, more of a good call for the bond market, though I was focusing on the equity market.

Lisa Abramowicz (3:05)

So Ed, you said it's a good time to proceed with caution. This morning, we were just talking, John mentioned that AURA has postponed its IPO due to what it called uncertainty in the market. Even as it reports a 90% revenue growth over the year of 2026 Is this potentially the sign of something breaking when it comes to the pipeline of deals that are trying to get done?

Edward Yardeni (3:29)

Well, I kind of am watching Oracle more closely because of the Stargate deal where Oracle is in a partnership with OpenAI and SoftBank to build data centers. I think the total commitment is $500 billion.

And just recently one of those data centers was postponed rather significantly because the 19-mile gas pipeline in New Mexico was rejected by the state. So yeah, there's starting to be some stresses in the AI trade as well.

And of course, that's what has continued to hold the market up quite well near a record high for both the NASDAQ and the S&P 500

Lisa Abramowicz (4:16)

Does this mean that at this point, if something might break or there are signs that at least the broader risk appetite is waning or at a pretty accelerating clip, does that make you bullish bonds? We heard from Jim Bianco yesterday that he is getting bullish for the first time in years just based on this technical retracement.

Edward Yardeni (4:34)

I would say that bonds yielding 5.25% are very attractive, you know, certainly on a ten-year basis.

The good thing about bonds is if you just hold them, you get your money back and you get the yield. And I think, again, 5.25% is a pretty good yield, but it doesn't feel like this is necessarily the peak in bond yields. I think even Bianco said that we might find that we can get even better yields if we just kind of wait here. So I'm not convinced that 5.25% is necessarily the top in yields. I was thinking that that was the case, but I'm increasingly wondering whether the unwind of the yield curve trade is a big problem here. This kind of, I just recently wrote actually last night that this might be the revenge of the bond vigilantes. The bond vigilantes were suppressed from the great financial crisis to the great virus crisis with quantitative easing and zero interest rates. And now that they've been sort of liberated and free to express an opinion, they're saying, well, you know, you accumulated all that debt at near zero interest rates back then. Now you're going to have to refinance it at these yields. And that's concerning.