The vigilantes may have gone into retirement during the Clinton years in the US, but they certainly did not in Europe. They ‘rode herd’ on monetary union and aggressively punished policies that were deemed lax by the standards imposed at Maastricht in either 1990 or 1991. They made their presence known right until 1999 when currencies were fixed intra europe. These vigilantes were far more aggressive than the crowd that ‘played’ in the US at the time.

again, pedantic yes – but now that we are down this path….

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Through the 70′s and 80′s as Freiedman’s ‘special’ monetarism took hold, I say ‘special’ because it does not consider asset price increases to be inflation, an obsession with M’s growth and Fed ease had continually sent bond yields higher. Admittedly there was a trend lower after the inflation died, but the vigilantes were always there to spank the authorities when money and credit were deems too loose.

Then the market crashed on that morning and The Street saw God. Greenspan said he would supply any and all liquidity necessary and instead of killing bonds they took off. The rest is history. The Street figured out that real profits would come from endless and unlimited credit and monetary growth. Especially because they themselves would create it and direct it.

Admittedly the vigilantes made a brief reappearance when Clinton came along, to serve a political purpose. The gist of which was the government must not borrow money and give it to Negroes. Once Clinton agreed, to that and everything else Rubin and The Street could think of the vigilantes went into retirement.

If the buyers of GM debt bought cover, there is no way they do any deal for less than 100 cents/$.
GM goes Ch 11, a credit event is triggered and the bond is made whole.
Enough with the testosterone of the bond holders— they have insurance for this eventuality, no?