* Congress under renewed pressure to revise antitrust laws
* US infrastructure plan would boost growth and lower debt, predicts study
* Survey shows economists expect several US rates hikes by 2023
* UK economy fell more than expected in Q1, revised data show
* Eurozone inflation eased in June, ahead of expected rebound in summer
* China Mfg PMI slips to 50.9, indicating a modest pace of growth in June
* US Consumer Confidence rises to new peak in June following onset of pandemic
* US 1-year change in home prices accelerated further in April, above 2005 peak:

In recent weeks I’ve been building models that estimate a theoretical “fair value” for the world’s most important interest rate: the benchmark 10-year Treasury yield (see here and here). The goal: combine the results to develop a more robust estimate by using the average. As such, more models are better and so today I introduce a third approach to econometrically approximate the “correct” level of the 10-year rate.

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* Militias fire rockets at US troops in Syria after airstrikes
* Federal court dismisses antitrust case against Facebook
* Delta variant is spreading, raising risk of potential Covid-19 spikes in the fall
* US demand revival is driving world economic recovery
* Drought in US West will add to upside pressure on food prices
* Considering what could wrong for markets, the economy and more
* Is fragility the new normal for the US stock market?
* 10yr-3mo Treasury yield curve continues to show downside trending bias:

Nearly every slice of the major asset classes recovered last week from the previous week’s correction, based on a set of exchange traded funds through Friday’s close (June 25). The main exception: US investment-grade bonds.

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* US launches airstrikes on militia targets in Iraq and Syria
* White House and Senate negotiators try to keep infrastructure deal alive
* Fed official highlights risk of a bust after US housing boom
* Central banks start or plan withdrawal of emergency stimulus
* Heatwave scorches US Northwest states
* Biden seeks to shift economic narrative away from inflation to recovery
* US consumer sentiment revised down for June but still higher vs. May
* US consumer spending unchanged in May; incomes dropped for second month:

Most markets around the world snapped back last week, putting passive beta portfolios back in the lead for performance.

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● The Age of Fire Is Over: Why All Existing Forecasts on the Energy Transition Are Wrong
Vincent Petit
Summary via publisher (World Scientific)
The heart of the contemporary argument on climate change and energy transition focuses on how energy supply should be decarbonized to mitigate greenhouse gas emissions. This book proposes an alternative approach. The Age of Fire is Over: A New Approach to the Energy Transition finds that energy transitions are not driven by supply-side driven transformations but rather by evolutions in demand patterns. Exploring the potential of recently emerged key technologies, The Age of Fire is Over argues that the so-called Energy Transition has not yet started. In the future, key technologies will significantly transform demand and provide services at a fraction of today’s cost or offer new services not yet imagined.

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In this issue:

• Bounce back: stocks, real estate and commodities recover
• Strong gains for our portfolio strategy benchmarks

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Equity Tail Risk in the Treasury Bond Market
Mirco Rubin (EDHEC) and Dario Ruzzi (Bank of Italy)
December 23, 2020
This paper quantifies the effects of equity tail risk on the US government bond market. We estimate equity tail risk as the option-implied stock market volatility that stems from large negative jumps as in Bollerslev, Todorov and Xu (2015), and assess its value in reduced-form predictive regressions for Treasury returns and an affine term structure model for interest rates. We document that the left tail volatility of the stock market significantly predicts one-month-ahead excess returns on Treasuries both in- and out-of-sample. The incremental value of employing equity tail risk as a return forecasting factor can be of economic importance for a mean-variance investor trading bonds. The estimated term structure model shows that equity tail risk is priced in the US government bond market. Consistent with the theory of flight-to-safety, we find that Treasury prices increase and funds flow from equities into bonds when the perception of tail risk is higher. Our results concerning the predictive power and pricing of equity tail risk extend to major government bond markets in Europe.

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* Biden, bipartisan group of senators agree on near-$1 trillion infrastructure bill
* US bans imports of China solar materials linked to forced labor
* Which China firms are the next to suffer from Beijing’s fintech crackdown?
* The enduring influence of Larry Summers’s views on US economics
* US jobless claims continued to drop last week
* Trade deficit for US widened in May
* Revised US GDP growth in Q1 unchanged at strong 6.4% increase
* US durable goods orders accelerated in May as new orders for planes rose: