Infectious disease-related uncertainty and the safe-haven characteristic of US treasury securities

Asian holding of US Treasury securities: Trade integration as a threshold

This paper aims to examine the predictive power of the daily newspaper-based index uncertainty related to infectious diseases (EMVID) for the US Treasury securities’ realized volatility (RV) using the heterogonous autoregressive volatility (HAV-RV) model. In our out-of-sample forecast, we find strong significant evidence on the role of the EMVID index in forecasting the volatility of the US Treasury securities in the short-, medium- and long-run horizons except for the US 2-Year Treasury-Note (T-Note) Futures. Assessing the EMVID index role during the COVID-19 episode, we find that even in this short period, the index role in predicting the US Treasury securities is highly significant. These findings have important implications for portfolio managers and investors in times of unprecedented levels of uncertainty resulting from epidemic and pandemic diseases.

This article offers new theoretical and empirical insights to explain the resilience of US Treasury securities as the world’s premier safe or “risk-free” asset. The standard explanation of resilience emphasizes the relative safety of US Treasuries due to a shortage of safe assets in the global political economy. The analysis here goes beyond the standard explanation to highlight the importance of domestic politics in reinforcing the safe status of US Treasury securities. In particular, the research shows how a formidable “bond” of interests unites domestic and foreign owners of the public debt and works to sustain US power in global finance. Foreigners, who now own roughly half of the US public debt, have something to gain from their domestic counterparts. The top 1% of US households, which dominate domestic ownership of US Treasuries, has considerable political clout, thus alleviating foreign concerns about the creditworthiness of the US federal government. Domestic owners, in turn, benefit from the seemingly insatiable foreign appetite for US Treasury securities. In supplying the US federal government and US households with cheap credit, foreign investors in US Treasuries help to deflect challenges to the top 1% within the wealth and income hierarchy.

We study 2001–2020 flight-to-quality episodes encompassing two planetary-scale crises: the Global Financial Crisis (GFC) of 2007–2008 and the coronavirus-triggered global meltdown. We focus on time-frequency lead-lag nexuses between holding emerging market (EM) debt and investing in relatively risk-free US Treasuries. Wavelet coherency along with the phase-difference approach is used. Our results reveal varying lead-lag patterns and low-coherence zones between EM bonds and US Treasuries, which imply the existence of appealing diversification attributes. The flights-to-quality during the crisis periods, such as the GFC and COVID-19 pandemic, emphasize the safe-haven characteristics of US Treasures. They also evidence that the post-Covid tightening of credit spreads to the pre-crisis levels is faster than the post-GFC recovery. We demonstrate that for EM debt investors, the US Treasury market allows for dynamic risk mitigation strategies during both global crises.

We examine the impact of global geopolitical risk (GPR) measures on US Treasuries’ returns and volatilities, differentiating between long- and short-run investment behaviours among an array of time-to-maturities ranging from 1 month to 30 years, taking into account various economic and financial factors. Using monthly data and a panel autoregressive distributed lag (ARDL) model, the results indicate a negative long-run relationship between US Treasuries’ returns and the global GPR index. These results generally hold when we consider geopolitical threats and geopolitical acts, although they exhibit some discrepancies between these two components and across the yield curve. Further results show a positive and strong long-run relationship between the US Treasuries’ realized volatilities and the various geopolitical risk measures. The evidence holds true when we disentangle ‘bad’ from ‘good’ realized volatilities, although the impact of bad volatility is stronger than that of good volatility, which points to an asymmetric effect of realized volatility in US Treasuries. A sub-sample analysis suggests the robustness of the main results. Our analyses provide the first empirical evidence of the information content of GPR for US Treasury securities’ returns and volatilities, which matters to fixed-income investors and decision-makers at the Federal Reserve.

It happens quite usually that national politicians can regularly speak of limiting Social Security and Medicare in some ways. However, when confronted with enough public scrutiny in general, those politicians who advocate such reductions become less strident in their own comments. Taxes from the Federal Insurance Contributions Act (FICA) provides revenue for the Social Security and Medicare programs. The amount of gathered tax revenue is partially dependent on the payroll FICA tax cap. This article explains how the cap works. Social Security started in 1935, as part of the New Deal. In 1956, insurance to aid disabled people was started. In this article, different aspects of that cap are also examined. In 1965, the Medicare program came into effect. Any temporary surplus of federal funds must be used to hold US Treasury Securities. Starting in Fiscal Year 1969, the United States of America have operated under the law of the Unified Budget Act. This act stipulates that all receipts and outlays of all federal spending be consolidated into a unified budget. Much of these funds will be needed as future retirees receive benefits from the Social Security and Medicare. As that happens, there may be comparatively less US Treasury securities held by the Social Security and Medicare Trust funds. This article shows some of the concerns that the President and Congress face in budget negotiations. In 2017, the rating for long-term US Treasury Securities stayed at AA+ by Standard and Poor’s, a credit rating firm. Both Congress and the US President needed to work together to slow the growth of annual deficits, which adds to the federal debt. Interestingly, two other bond rating firms, Moody’s Investors and Fitch, maintained the bond rating of AAA. It has to be remembered that none of these ratings are permanent. As time goes on, firms that give bonds ratings will keep on analysing those who issues securities, including the US government. Furthermore, not all credit rating agencies agreed with any fall of the credit rating. As to a more recent credit rating, US Treasuries were rated at AAA. The reader should always be cognizant of the fact that ratings can change over time. Such times as occurred in May 2023 (debt ceilings, tax revenues and spending disagreements between the legislative and executive branches) may or may not be contemplated regarding the credit rating of US Treasuries.

An Inquiry Concerning Long-Term US Interest Rates Using Monthly Data

As a crucial share of global liquidity, USD liquidity heightens a prominent negative spillover effect within the international monetary system.Especially, against the turbulent world background after the 2020 pandemic and the Russo-Ukrainian War, it is more observable to intensify the negative spillovers of USD liquidity during bad times.US Treasury securities, which greatly contribute to the USD liquidity externality because of their safety and reliability, have long been preferred by the world's main economies.Moreover, the yield of US Treasury securities can be an important factor determining the USD liquidity spillover and is a key consideration in evaluations of the international monetary system.Considering the dilemma USD assets holders are faced with, we dig into the spillover effect at the macro-economic level and extend this mechanism into asset allocation effectiveness at the micro-economic level.Our investigation results point to a significantly negative relationship between the effect and risk level of USD assets on the one hand and the scale of USD foreign exchange reserves on the other.This implies that the world's main economies face more challenges regards to international liquidity management, lacking a feasible plan for replacing USD assets.We contend that reform and diversification are needed in the current USD standard monetary system to strengthen the effect of global liquidity.

Price discovery in the dual-platform US Treasury market

Price Discovery in the Dual-Platform US Treasury Market

Did the repeated debt ceiling controversies embed default risk in US Treasury securities?

Risk premia in the term structure of interest rates: a panel data approach

Do Asian investors rebalance their portfolios and what are the consequences?

The increasing default risk of US Treasury securities due to the financial crisis

With the outlook for continued US budget deficits and growing debt – and the uncertainties regarding their financing – we examine the role of foreign official holdings of US Treasury securities in determining Treasury security interest rates, and the resulting implications for international portfolio allocations, net international income flows and the US net international debt position. We update estimates of the relationship between Treasury interest rates and US structural budget deficits, and extend that empirical analysis to include foreign official and Federal Reserve holdings of US Treasury securities. Although relationships suggest that the world portfolio could potentially accommodate financing requirements over the intermediate horizon, substantial uncertainty surrounds the likelihood of that accommodation and the associated effects on interest rates and adjustments in international portfolios. Notably, unprecedented levels and growth of foreign official holdings of US Treasuries will be required to keep longer term Treasury security interest rates from rising substantially above current consensus projections.