Term Spreads in 2018: An Annotated History

Today, the 10 year-3 month spread ended below 1%, in the absence of safe haven effects. The 10 year-2 year spread ended at 0.35%.


Figure 1: Ten year constant maturity Treasury minus three month Treasury secondary market yield differential (blue) and Ten year minus two year constant maturity Treasury yields (green), in %. Source: Federal Reserve Board via FRED, Bloomberg for 6/19, and author’s calculations.

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As a Social Scientist, I Thank Mr. Trump: Trade Policy Edition

One of the key difficulties in measuring effects and attributing causality is the fact that there are typically many confounding factors. That is why social scientists (and financial economists) often resort to event analyses — looking at what happens around a certain event (like an announcement) when little else is happening. Because there is so much going on with the Trump administration, this is not always possible. However, yesterday evening, the White House released a directive to USTR to identify an additional $200 billion worth of taxable Chinese imports. Here is what happened.


Figure 1: Soybean July futures, 30 min increments. Time stamp is UTC. Dashed orange line at approximate time of WH release. Source: TradingEconomics.
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Round Two for US-China Trade?

One irrelevant graph and one (possibly) relevant graph, in light of Mr. Trump’s statement on additional trade sanctions.

First, the irrelevant: the US-China trade deficit, which has been deteriorating over the first five quarters of the Trump administration.


Figure 1: US-China trade balance (both goods and services) as a share of GDP. NBER defined recession dates shaded gray; 2017Q1-2018Q1 shaded orange. Source: BEA, NBER, and author’s calculations.
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What Does This Mean? Trump asks USTR to…”identify $200 billion in Chinese goods for additional tariffs at 10% rate”

That’s part headline from CNBC.

President Donald Trump has requested the United States Trade Representative to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10 percent.

The new duties will go into effect “if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced,” the White House said in a statement late on Monday.

The move came after the Trump administration on Friday announced that the U.S. would impose a 25 percent tariff on up to $50 billion of Chinese products. Tariffs on an initial list of goods worth some $34 billion will kick in on July 6.

Upate, 5:06PM Pacific: And here is the press release, via Christina Wilkie: