斯坦福教授解析美债收益率飙升：期限溢价与供给冲击

Can you convince Joe that the term ‘premium’ is a useful concept? He doesn't believe in it. I think you believe it exists, but you don't believe that it's useful in any way. I guess you're not going to defend yourself, Joe. I'm a simple man. I look at a 30 year old. I think it looks like a 30 years worth of overnight rates. You just add them up, and I just, you know, that's that's how it. That's what I was. I never was like, no, that's a term premium.

And then they say and then I say okay, but what does it look like. Well we can't really measure it. And then all the models that we have to measure don't work. But trust us, this is what they show you. And then they say and then they say oh well they need some Treasury investors need compensation for risk. To which I say just Treasury investors, as if there's something special about they like I, I really I really struggle with it.

So this is why we need a Stanford economist to straighten me out. It's a yeah. It's an easily measured, concept. Okay. So it tells everyone the value of short term versus long term money and interest rates, but then decomposing it is the hard part. So you mentioned, you know, there's the path of expected short term interest rates that's built in, that in its of itself reflects inflation. Right. And then on top of that there's a risk premium and how to decompose that.

You know, economists like John Cochrane, who we mentioned earlier with Monica Patsy, have, you know, done some of the best work on that decomposition. And it changes over time depending on one of the things that we just discussed earlier, which is the volume of Treasury issuance that elevates the entire curve and it elevates it more in the future. If you don't think that the, fiscal deficits are going to go down. All right.

Joe's going home from his podcast with homework. I'm going to do some reading for assigned reading. Hello, and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway and I'm Joe Weisenthal. Well, Joe, we are still at Jackson Hole. Yeah. Where the official theme of this year's symposium is Financial Innovation in Payment. However, the unofficial theme has to be what the heck is going on with bond yields and the Federal Reserve?

Because this whole meeting is coming against a backdrop of higher yields, particularly at the long end. A new fed chair seems to want to make a mark on the fed, and has started all of these different task forces to look at things like columns and balance sheets. And then, of course, we also have a fed that seems to kind of maybe be operating at Cross Currents to the US Treasury, given that the Treasury is now buying back longer dated bonds and seemingly suppressing longer dated yields.

There are so many different dimensions to what you described. Right? So there is the formal technical thing. There is the sort of relationship between the fed and the Treasury. There is the new, things going on inside the fed. There's obviously the, the warmth and the economy. By the way, the sun just came out. We're recording outside. It has been rainy and cool all day. Now it's suddenly got hot again. Maybe that's a sign.

Anyway, that's why it's fun to be in Jackson Hole, though. There are all kinds of different people we can talk to, including people who sit perfectly at this intersection of all the things that we're talking about. That's exactly what I was going to say. So the guest for today, truly the perfect guy, someone who's able to sort of synthesize the macro and what's going on in the bond market, as well as some of the operations of the actual treasury market.

So truly the perfect guest. We're going to be speaking with Darrel Duffie. He is, of course, professor of finance over at Stanford University. So Darrell, thank you so much for coming back on Odd Lots. Tracy Joe, great to be back. Thank you. Is there a connection between higher bond yields and the payment system? Basically why are you here. Well there can be in March of 2020, when the markets became dysfunctional, the fed had to step in and, dig out the balance sheets of the largest dealers to keep the bond market moving.

And bond yields jumped and were very volatile. The last time we talked was also a Jackson Hole. And we talked about this relationship between just the sheer volume of public debt that's traded these days and the sort of like, scarce dealer balance sheet. And this is like, you know, often when people talk about the size of the debt, they talk about maybe like debt to GDP or something like that or whatever, this is like what you focus on then and some of your work takes it from a different angle.

Yes, talk about the volume, but just sort of the pipes that we have to run it through. That's right. And you know, after that event in 2020, I said it would happen again. Dealer balance sheets would get clogged again. But even with massive amounts of trading we're seeing today, the dealers have more space yet. Could be capital regulations are not as strong. It could be the dealers have recapitalized, but they're definitely, in force.

I definitely want to talk more about that. But just on a basic level, when you look at yields on something like the 30 year above 5%, I know they've come in slightly today following the chairman's speech, but when you see a yield at that level, what do you think? What is it telling you? Well, if I'm the Secretary of the Treasury, it's telling me that the United States is spending a heck of a lot on interest expense, and I need to do what I can to get those yields down.

The question is, what can the Treasury secretary do? As an economist, I run the following thought experiment. Suppose, Tracy, I were to convince you, there's no inflation risk. Inflation is, as indicated in today's markets, is pretty stable going forward. The sovereign is not going to default. You are, let's say, a hedge fund, a macro hedge fund. You have 20 billion of the ten years, and I wish but go on. And, I'm calling from the Treasury Department, and I'm suggesting that you could take another ten.

This based on your on your own balance sheet to do that. Now, given the conditions that I described for the safe bonds, why wouldn't you? And the reason is you already have what you chose to have at 5.3%. And in order to get you to buy 10 billion more, you need a higher yield to compensate you. The foreign central banks, they have had what they need for a long time now. They don't. They're not buying more. Foreign investors generally are not keeping up with the size of the bond market.

So it's the discretionary investors, mutual funds, hedge funds, banks, insurance companies, pension funds that are yield sensitive and are being asked to take more of a pretty safe asset, but they're not going to do it unless they get more yield compensation. It's an interesting way to think about it. So in Tracy's, proverbial hedge fund, she has the $20 billion allocation to treasuries. But no one's paying Tracy just to hold treasuries.

Right. So she presumably has a lot of other, assets, risky assets. Maybe she's been in. I thought the best asset, maybe the best. Maybe she's been in Korean chip stocks or all the other things. When we think about the pricing, though, to what extent does it make sense to think about a Treasury bond being is in competition for other theoretically investable assets? And when all those are flying to the moon, or many of them, like we've seen, does that have a sort of a reverberation on to the risk free asset?

Sure it does. And it's other bonds included in that. The hyperscalers, famously been demanding a lot of investment by bond investors, and it's all piling on. But the biggest culprit is our governments generally, not just the US, but especially the US and government. You know, deficits and debt to GDP are spectacularly high and there's no end in sight. So this piling on effect, you know, I think it's mainly in the bond market.

Debt to GDP ratio is no one in say etc. is cer