Yardeni Sees Bond Yields Heading in ‘Danger Zone' Direction

• Global bond yields are rising due to the unwinding of the Yen carry trade as the Bank of Japan raises interest rates.
• US bond yields are increasing due to a booming economy, strong consumer and capital spending, and high demand for credit from AI hyper-scalers.
• The US fiscal deficit is a significant concern, and if 10-year yields quickly reach 6% or higher, it could create cracks in the financial system, potentially requiring Treasury intervention.
• France's bond yields are also rising, showing signs of a potential debt crisis similar to Greece in 2010.

Edward Yardeni discusses the global rise in bond yields, attributing it to the unwinding of the Yen carry trade and the strong US economy. He warns that US bond yields are heading towards a 'danger zone' due to robust economic activity and large fiscal deficits, which could lead to financial system cracks if yields rise too quickly. Yardeni suggests that US fiscal policy, not bond vigilantes, is the primary driver of the current yield increases.