Why Governments Are Afraid of the Bond Market (Robin Wigglesworth Explains)

Watch on YouTube ↗  |  September 11, 2026 at 16:00  |  52:01  |  Meb Faber Show
Speakers
Robin Wigglesworth — Editor of FT Alphaville and author of A Fabulous Debt
Meb Faber — Co-Founder & CIO, Cambria Investment Management

Summary

Robin Wigglesworth, editor of FT Alphaville and author of A Fabulous Debt, discusses the historical importance of bond markets and how they have financed wars, built states, and disciplined governments. He explains the hidden plumbing of repo leverage, Treasury basis trades, fixed income ETFs, the Liz Truss gilt crisis, and long-duration bond risks. He also shares views on structured products, private credit, retail liquidity structures, and misleading income labels.

  • Bonds are the bedrock of the financial system and globally larger than stocks, though often overlooked.
  • Bond markets can discipline sovereigns, as seen with the UK gilt crisis and US tariff pause.
  • Repo and leveraged Treasury basis trades have made safe-haven bond markets more fragile.
  • Fixed income ETFs are improving liquidity in corporate credit and making bond trading more equity-like.
  • Long-duration bonds, including TIPS and century bonds, can suffer severe losses when rates rise.
  • Private credit is frothy and faces a nasty credit cycle but is structurally useful for the financial system.
  • Structured products and semi-liquid retail vehicles carry misselling and liquidity risks.
  • Covered call and other income products may mislabel return of capital as income.
Ideas
Robin Wigglesworth Editor of FT Alphaville and author of A Fabulous Debt 31:34
Fixed income ETFs improve bond liquidity.
Fixed income ETFs are not as toxic as feared; they are becoming a flywheel for electronic, portfolio, and systematic trading, ameliorating liquidity issues in corporate bond markets and making large parts of credit more liquid and more equity-like.
Fixed income ETFs HIGH
Robin Wigglesworth Editor of FT Alphaville and author of A Fabulous Debt 35:53
UK gilts are fragile from leverage.
The UK gilt market is more volatile and fragile because of twin deficits and leveraged LDI strategies that were forced to sell gilts into margin calls during the Truss crisis; the episode shows even a major sovereign bond market can suffer historic havoc when leverage unwinds.
UKGILT HIGH
Robin Wigglesworth Editor of FT Alphaville and author of A Fabulous Debt 38:59
TIPS can suffer when rates rise.
TIPS are often mistakenly recommended as inflation protection, but their duration is immense, so they can lose badly when real rates rise; in 2022 they got taken to the woodshed.
TIP HIGH
Robin Wigglesworth Editor of FT Alphaville and author of A Fabulous Debt 39:14
Century bonds can lose eighty percent.
The Austrian century bond issued in 2021 shows that even a safe government bond from a country that has never defaulted can lose around 80% of its value when interest rates normalize and inflation rises, because of extreme duration.
Austrian century bond MED
Robin Wigglesworth Editor of FT Alphaville and author of A Fabulous Debt 41:29
Treasuries are less safe due leverage.
The Treasury market has become less safe as a haven because a large share is held by leveraged hedge funds running basis trades long Treasuries/short futures, financed in repo at 10-100x leverage; more leverage and a larger repo market mean the normally boring safe-haven bond market is more fragile.
TLT HIGH
Meb Faber Co-Founder & CIO, Cambria Investment Management 43:19
Covered call income labels are misleading.
Covered call funds and other income products are marketed as passive income, but the concept of bond-like income has been transplanted onto products where it may be return of capital or otherwise different; this mislabeling is predatory and regulators should require different terminology.
Covered call funds MED
Robin Wigglesworth Editor of FT Alphaville and author of A Fabulous Debt 44:21
Structured products are disguised risky derivatives.
Many structured products that grew in the ZIRP era are complex equity derivative packages dressed up as safe savings products for ordinary investors in South Korea, Japan, Germany, and elsewhere; he won't touch them due misselling risk.
Structured products HIGH
Robin Wigglesworth Editor of FT Alphaville and author of A Fabulous Debt 45:38
Private credit is frothy but sound.
Private credit has grown too frothy, with too much money, loose underwriting, hidden problems, and rising PIK usage; a nasty credit cycle is likely to cause losses and embarrassment. But structurally, private credit is a good asset class because moving lending from banks to locked-up funds can de-risk the financial system, so it should survive and keep growing.
BIZD HIGH
Robin Wigglesworth Editor of FT Alphaville and author of A Fabulous Debt 49:24
Semi-liquid retail private structures pose danger.
Retail-oriented semi-liquid or supposedly liquid private credit/private equity structures are poorly structured; offering same-day or one-day liquidity is a systemic danger and leads to sub-optimal outcomes for investors, managers, and markets.
Semi-liquid private credit/private equity structures HIGH
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This Meb Faber Show video, published September 11, 2026, features Robin Wigglesworth, Meb Faber discussing Fixed income ETFs, UKGILT, TIP, Austrian century bond, TLT, Covered call funds, Structured products, BIZD, Semi-liquid private credit/private equity structures. 9 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Robin Wigglesworth, Meb Faber  · Tickers: Fixed income ETFs, UKGILT, TIP, Austrian century bond, TLT, Covered call funds, Structured products, BIZD, Semi-liquid private credit/private equity structures