Blain’s Morning Porridge, 5^th October 2026 – The History of the Bond Markets. Lessons to learn.

“Bonds don’t answer questions. They inflict consequences.”

This morning something different. A review of Robin Wigglesworth’s new book, A Fabulous Debt, on the history of the Bond Markets. Great read and absorbing. It’s a broad brush explaining how bonds have evolved and developed. Bond markets guide far more than just interest rates – they are power, political stability, and can drive market instability. In Bonds there is truth. The book leave interested readers wanting to know more in terms of the consequences of the Bond Markets and mechanisms.

LINK TO PODCAST

Book Review – A Fabulous Debt, by Robin Wigglesworth

Key Takeaways

• I enjoyed A Fabulous Debt enormously – Wigglesworth has been able to condense and tell the history of the most powerful market on the planet in an engaging way.
• Bonds have shaped the global economy and geopolitics – from wars to dominate the Med, across Europe and America, and now globally.
• Instability in bond markets – which is a rising risk today – will impact how the global economy develops and creates frictions across the wider political economy and geopolitical forces.
• Complexity, leverage, innovation and the evolution of the bond markets is largely driven by commercial incentives like fees and returns, but often result in crises when misplaced confidence, failing models, and excessive borrowing conspire to unravel them.
• Mispriced bonds distort the valuations of all other assets – leading to all kinds of consequences across investments and politics, including populism.
• The weakness in the bond machine has repeatedly been people. Bonds (and their many derivatives) solve problems, but greed and hype are drivers and often lead to disaster. The history of the bond markets shows how the same themes resonate through time.
• How the bond markets transmit signals through the economy is the key to understanding: “In Bonds There is Truth.”

To be successful in markets you need to be interested, even passionate about them. The Bond Market has long needed a good book to explain its background and context, to tell its’ history, and explain its place and power in today’s swiftly evolving, highly complex and closely inter-related economic environment.

FT Journalist Robin Wigglesworth’s new book – A Fabulous Debt, The Epic Story of How Bonds Built the Modern World – is a breathtaking gallop through the history of Bonds. It’s an easy read because he has the style to make dull, boring, and (usually) predictable bonds interesting and entertaining.

Moreover, I am declaring A Fabulous Debt recommended reading for Morning Porridge readers and for the students of the post-grad course in Asset Management at The Edinburgh Business School.

The book comes at a fascinating time – just as rising bond yields threaten to throw the uncertainty of a bear market into overly rosy equity expectations as inflation mounts and global trade wobbles. Over the weekend it’s become clear a new European bond crisis is gestating (see Friday’s Porridge: The No-see-Um Market Crisis Emerges in France). Bond market cycles are even more consequential on economic history than successive booms and crashes in stocks. As I repeatedly remind Porridge readers – IN BONDS THERE IS TRUTH.

However, while A Fabulous Debt is a great read, it will not make you a bond expert, or a bond trading legend, overnight. But it will give you some clues.

I gave my first ever lecture on the bond markets way back in 1989. I was asked to lecture the new graduate intake at one of the City’s Golden Circle Law Firms – given that many of them would end up working on bonds. I started by asking what they recalled from reading the FT that morning. Some remembered corporate tosh and tattle moving stock prices going up or down. I asked if anyone had read about bonds. Blank faces. I opened the second section of the Pink-Un and opened it up halfway where I showed them a very short 3-column box that listed 6 or 7 Eurobonds issued the day before. I then took them to an even smaller box on the 2^nd last page that listed Gilts prices.

I then told them how much bigger and more important bonds are than stocks. Today, Wigglesworth tells us there is $188 trillion of bonds outstanding – equity is less than $133 trillion. The biggest lender on the planet is not a bank, but Blackrock, holding over $3.2 trillion of debt. He starts his tale with the story of how the Bond market even scared Donald J Trump into scaling back Liberation Day tariffs!

Wigglesworth tells the story of bonds superbly well. He starts as Constantinople and Venice duke it out in the 12 century and how the Serenissima paid for its’ war by inventing bonds! He canters though the innovative use of bond funding to build the Netherlands and then on to England – explaining as he goes the basis behind credit, and how bond yield move inversely to their price. The more risky a bond becomes, the higher it’s yield rises and its price falls – understand how that works and you are 80% of the way to becoming a bond master! (The next 20% are the hard yards – after 40 years there is still the final 5%, I struggle to comprehend about how bonds, philosophy and people react.)

Wigglesworth explains how the UK mobilised its debt market, and used bonds for power projection, finance multiple alliances to keep any other European power achieving regional ascendancy. Debt is power. Leverage magnifies power. He crosses the sea to New York (finally answering the question all Europeans want to know – who, what, why, and was Hamilton! Not just a corny musical.)

He then swiftly through financing the fictional nation of Poyais, the financing behind Railway Mania (shades of AI), the lessons of the American Civil War and the run up to the first global financial crises of the modern era – 1873 (itself the subject of a new book which I’m going to read next). He races through War Loans, Liberty Bonds, the Great Crash, financing the Second World War and the emergence of the system, Bretton Woods and more…

And suddenly we are into modern financial history.

Much of it I recognise, having laboured in markets since 1985 as a young banker, a syndicate junior, a journalist, originator, bond trader and salesman, private capital specialist, and investor as I’ve watched the Euromarkets blossom and grow into the global markets of today. Over the years I’ve realised some basic truths. No markets are alike and settled; each is unsettled in its own way. Equities are about stories. Bonds are about facts.

Wigglesworth’s book is engaging, but he attempts to cover the explosive evolution of innovation in bond markets over the last 40 years by covering half-a-dozen themes, each in a single chapter, largely by tying them to historical figures he credits as the guiding lights behind them. He has no choice but to use a broad brush to paint markets where we know hundreds of people deserve credit for the small things that moved them on.

It’s also important to remember, that most market innovations happened for one reason, and one reason alone – to generate fees, profits and returns. I’ve told the story before of the so-called Sharia Bond Market; innovated on the basis Islamic investors can’t receive interest, interest was dressed up as a “participation” (complete with a fatwa from an Islamic “scholar” to that effect. Bond issuers were told they could reach whole new investor groups of wealthy Muslims by issuing such “Sharia-compliant bonds”. Most of the early Sharia bonds were launched with yields a few basis points wider than conventional debt (to attract these “new” investors,) but were sold directly to London and European funds happy for the free basis points in return.

When I worked at Euromoney, I devoured Ian Kerr’s excellent History of the Euromarkets, the First 21 Years, and heard at least five versions of the first deal by Autostrada (which came a few months after I was born) from senior bond market guys, each of whom could justifiably claim shares in founding the Eurobond market – a generation now sadly passing on. (Sadly, I lent my copy of Kerr’s book to someone and will gladly pay up to acquire a copy if anyone still has it?)

In order to keep the book moving Wigglesworth covers the innovation of the Euromarkets through Siggy Warburg, meaning others don’t get much of a look in. He touches on some of the complexity of futures and options through Leo Melamed of the Merc. (It always stuck in my head how the head of the Chicago exchange was Melamed, and the villainous banker of The Way We Live Now was a Melmotte. Never been able to shake that tenuous connectivity!). Blythe Masters gets the credit for the credit derivatives market – and is the only woman in the book, aside from the 17^th Century Dutch woman who financed the first Dyke infrastructure bond, that literally built the Netherlands. Derivatives, Swaps and CDS are part of the fundamentally increasing complexity of bond markets. And as we all know… complexity hides complex dangers.

And at this point in history, Wigglesworth’s story has moved to America. He covers the emergence of Junk Bonds through the remarkable rise and fall and rise of Mike Milken and bonds as instruments of predatory corporate finance. Lew Ranieri (whom I met) is the flawed hero of the MBS markets, leading to complex CDOs and 2008. Securitisation would not be complete without reference to Michael Lewis’ Liars Poker (best book on markets of all time!) John Meriweather’s disaster at LTCM (driven by flawed complexity) gets a chapter, and does the increasingly erratic Bill Gross at Pimco. I knew Ralph Cioffi – the manager of the CDO fund to fail in 2007 at Bear Stearns. It’s then a rush to the finish line through the QE era, the coda that was Covid, and where we are today…

There are issues I feel Wigglesworth has missed. I would have loved his take on the European Sovereign Debt Crisis, and the players (particularly Mario Draghi.) How about a deep dive into Liz Truss and the Truster*uck that nearly sank Gilts – using it to describe the current political fear of “what the bond might think”? Nor has he told the hilarious and deeply disturbing story (illustrating an excessive lack of common investor sense even in the bond market) that is the Austrian 100-year bond.

If there is a single running theme to the last 40 years of his bond history, it’s the way ideas and concepts embracing bond market complexity, complex maths, excessive leverage, greed and “strategies” seem to conspire to go horribly, horribly wrong. We see it as Milken is dragged off to sew mailbags, Meriweather goes bust, Ranieri is sacked, and in 2008 as the Global Financial Crisis and complex debt markets nearly immolated the global economy.

As a whole, Wigglesworth has given us a superb history of bond markets. It makes a dull subject readable by relating to interesting personalities. But… while he tells the story of bonds, but he hasn’t really delved into the power or truth of bonds. And that’s why bonds are so important. Bonds are just one part of the political economy which needs an understanding of sentiment and belief, innovation and invention, politics, risk and conflict.

I would observe the consequences of bonds – when bonds are mispriced and yields are repressed, then they set the relative price of all other financial assets too low. When risk is mispriced – there are consequences. Wigglesworth knows this to be the case in his chapter on QE – but restricts his thoughts on the enormous gains in stock markets due to mispriced bonds as a factor driving inequality – which itself is massively consequential in politics.

You can argue stock market misplacing is not a bond story, but it is. So is how the growing instability around the populist politics of those “left-behind” is rooted in economics, and the price of risk – which are a function of bonds. The power of bonds deserves a very deep delve!

The issue of consequences, cause and effect of mispriced financial assets due to mispriced bonds has second and third derivatives. For instance, the main reason for the “exceptionalism” of the US economy is the exceptional power and depth of its capital markets. Cheap money (a consequence of QE) powered stock market confidence and speculation. Combined with how Europe placed enormous regulatory burdens on banks post 2008 (a bond consequence), yet American banks were swiftly freed up, today US capital markets dominate global markets, and in this age of Trump are one of the few remaining certainties of dealing with the US!

As an exciting and very readable account of the bond markets, Wigglesworth’s Boys and Girls Big Bumper Book of Bond Market History is absolutely top notch. I suspect it will be sitting on my reference shelf longer than I’ll be sitting on this chair.

The succession of crises highlights that bonds may be dull, boring and predictable, but people being people and greedy, means they will keep happening. Nothing should really surprise us about bonds. They may be dull and boring compared to the rosy speculative narratives that dominate the equity markets – but they are far more consequential – a point he makes in the introduction: “the ascendance of the bond market… is the defining issue for today.”

A Fabulous Debt fills a space that needed to be filled. But it does not answer all the questions around the mechanisms of the Bond Market’s truth, power or influence. How the consequences of the Bond market ripple and resonate around markets is the next book that has to be written!

Out of time, and back to the day job…

Bill Blain

Author of the Morning Porridge
CEO Windshift Capital
Advisor – Spitfire Strategic Capital

Meanwhile, don’t forget about my new book: The Battle for Hamble

You can read a review on the Society of Professional Economist’s website here.