Someone asked me the other day 'Where are the bond vigilantes?' The person...

Someone asked me the other day 'Where are the bond vigilantes?' The person who asked was referring to the treasury market in relation to the rising CPI. Before proceeding, let's discuss the term bond vigilantes. Richard Russell in Dow Theory Letters offers this viewpoint: 'These are the bond people who are like bloodhounds when it comes to inflation. When the bond vigilantes smell even a hint of inflation, they head for the exits, meaning they unload their bonds.'That is one kind of bond vigilante. A second kind of bond vigilante is concerned with receiving adequate yields when risks of defaults rise. In regards to treasury yields, with the economy heading in to a recession, consumer spending declining in real terms, unemployment rising and the ISM contracting, yields on treasuries should be dropping. And they have been as the following yield curve shows. Yield Curve For January 5 2008Chart courtesy of Bloomberg. Click on chart for sharper image. How To Find Bond VigilantesIf you want to find the bond vigilantes, you have to look in the right places. Treasuries are the wrong place. I suspect we see the 30 year long bond below 4% sometime in 2008.After a long hiatus, bond vigilantes are starting to show up in commercial real estate. For proof I offer Leveraged Loans Lose $28 Billion Carlyle Is Punished.