There's reason to be concerned about bond vigilantes, who are no longer under "lock and key" and are free to push yields higher, Wall Street veteran Ed Yardeni told CNBC on Friday.
Yardeni, a market historian, coined the term "bond vigilantes" in the 1980s to refer to investors who sell their holdings in an effort to enforce fiscal discipline. Having fewer buyers drives prices down — and drives yields up — in the fixed-income market. That, in turn, makes it more expensive for the government to borrow and spend.
"They had been sort of put under lock and key by the central banks. The Fed had lowered interest rates down to zero in terms of short-term rates and that pushed bond yields down. And then they bought up a lot of these bond yields," said Yardeni, president of Yardeni Research.