What’s Up With The Deep Dive In Treasury Term Premiums?

The 10-year Treasury Note’s term premium (an estimate of the extra compensation that the market demands for holding longer rather than shorter maturities) has been moderately negative for most of 2016, and there’s no sign that the red ink will fade any time soon. The sub-zero readings, based on New York Fed data, aren’t surprising in the current economic climate. The appetite for safe havens remains strong, largely because growth is expected to remain modest at best—in the US and around the world. But as the term premium ticks lower, the slide suggests that the bond market is moving deeper into uncharted territory.
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Book Bits |1 October 2016

● Among the Bankers: A Journey into the Heart of Finance
By Joris Luyendijk
Review via The Atlantic
How can bankers live with themselves after the destruction wrought by their industry? That’s in part what the Dutch journalist Joris Luyendijk sets out to uncover in his new book, Among the Bankers: A Journey Into the Heart of Finance, which was published overseas last year under the title Swimming with Sharks. The book attempts to lay bare not the technical workings of a very opaque industry, but the emotional and moral considerations of those who operate within it.
Luyendijk, a reporter at The Guardian who has a background in anthropology, poses that question of conscience over and over again. To answer it, he conducted hundreds of interviews with people who work in the City, London’s version of Wall Street.
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Research Review | 30 Sep 2016 | Managing Volatility Risk

Volatility Managed Portfolios
Alan Moreira and Tyler Muir (Yale University)
June 18, 2016
Managed portfolios that take less risk when volatility is high produce large alphas, substantially increase factor Sharpe ratios, and produce large utility gains for mean-variance investors. We document this for the market, value, momentum, profitability, return on equity, and investment factors in equities, as well as the currency carry trade. Volatility timing increases Sharpe ratios because changes in factors’ volatilities are not fully offset by proportional changes in expected returns. Our strategy is contrary to conventional wisdom because it takes relatively less risk in recessions and crises yet still earns high average returns. This rules out typical risk-based explanations and is a challenge to structural models of time-varying expected returns.
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Book Bits |24 September 2016

● The Wealth of Humans: Work, Power, and Status in the Twenty-first Century
By Ryan Avent
Summary via publisher (St. Martin’s Press)
None of us has ever lived through a genuine industrial revolution. Until now. Digital technology is transforming every corner of the economy, fundamentally altering the way things are done, who does them, and what they earn for their efforts. In The Wealth of Humans, Economist editor Ryan Avent brings up-to-the-minute research and reporting to bear on the major economic question of our time: can the modern world manage technological changes every bit as disruptive as those that shook the socioeconomic landscape of the 19th century?
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