Edward Conard

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  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, July 14, 2025

AI Summary. Manufacturing productivity growth fell behind other sectors after computer and semiconductor manufacturing productivity, which had grown at roughly 15% and 11% a year, decelerated substantially. The authors also present suggestive evidence that quality improvements are missed in price measures, estimating manufacturing productivity growth is understated by 0.8 percentage points, including 1.7 points for durable goods.

Enghin Atalay, Ali Hortacsu, Nicole Kimmel and Chad Syverson Working Paper
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Almost all measured productivity growth in US manufacturing since 1987 was in Computer and Electronic Products, but true TFP growth may be underestimated by 1.7pp in durables overall (and by 0.4pp in nondurables) due to quality improvements.

Why has manufacturing productivity growth fallen behind other sectors?

Core argument: Computer manufacturing total factor productivity grew about 15% per year and semiconductor manufacturing TFP more than 11% per year between 1987 and 2009, with both decelerating substantially by the early 2010s, which the authors link to manufacturing's lagging productivity growth.

In the late 2000s, manufacturing productivity growth started to fall behind productivity growth elsewhere. The first half of the article documents that these trends can be explained by the resolution of the ICT revolution. Between 1987 and 2009, Computer manufacturing TFP grew by an astronomical 15% per year. Semiconductor manufacturing TFP grew by more than 11% per year. By the early 2010s, productivity growth in these industries had decelerated substantially. We then marshal suggestive evidence that quality improvements and, by implication, productivity growth may be substantially underestimated [not only in computers and electronics, but] in durable goods manufacturing [overall]. Annual price changes of durable goods are 2.6 percentage points greater when using gross output deflators and import price indices than when using PCE price indices in computers and other electronic goods. Using BEA Input-Output matrices, we find that manufacturing TFP growth (from 1997 to 2023) is understated by 0.8 percentage points: 1.7 percentage points for durable goods industries and 0.4 percentage points for nondurable goods manufacturing industries.

Takeaways by Macro Roundup® AI

  1. Computer manufacturing total factor productivity grew about 15% per year and semiconductor manufacturing TFP more than 11% per year between 1987 and 2009, with both decelerating substantially by the early 2010s, which the authors link to manufacturing's lagging productivity growth.
  2. Using BEA Input-Output matrices, the authors estimate manufacturing TFP growth from 1997 to 2023 is understated by 0.8 percentage points, comprising 1.7 points for durable goods industries and 0.4 points for nondurable goods manufacturing.
  3. Annual price changes for computers and other electronic goods are 2.6 percentage points greater under gross output deflators and import price indices than under PCE price indices, which the authors offer as suggestive evidence that quality improvements are underestimated.

Related Articles:

  • America Is Missing The New Labor Economy – Robotics Part 1 — Building an identical robotic arm in the US costs about 2.2x more than in China, and US-labeled components still depend heavily on Chinese parts and materials with no scalable alternative. The author argues China is the only country positioned to capture full-scale intelligent robotic automation, which would let it outcompete the US across production.
  • The R&D Puzzle in U.S. Manufacturing Productivity Growth — Research and development spending in U.S. manufacturing has been rising relative to output and hours worked while productivity has been flat, which suggests the ability of research and development to boost productivity growth has been declining.
  • The Mysterious Slowdown in U.S. Manufacturing Productivity — US manufacturing labor productivity growth slowed broadly after the Great Recession, with the four largest firms in each industry averaging –0.5% growth from 2010 to 2022 versus 3.7% from 1987 to 2007, and smaller follower firms showing an identical 4.2 percentage-point decline. The authors find the slowdown spans all industries and firm sizes.

AI Summary. China posted a record half-year trade surplus of about $586bn, with exports up 5.8% year-over-year to $325bn and imports up 1.1%. Shipments to the US fell 16.1% from a year earlier, while exports to the 10 Southeast Asian nations in the Asean group rose 17%.

Bloomberg Staff Bloomberg
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Chinese exports hit $1.8T through 2Q2025, driving a record surplus of $586B. Bloomberg notes: “The pickup in China’s export growth in June was led by a rebound in shipments to the US after a temporary thaw in the trade war. The blip may not last long.”

Has China offset falling US shipments with record exports elsewhere?

Core argument: China posted a record first-half trade surplus of about $586 billion, with June exports up 5.8% from a year earlier to $325 billion, exceeding the median estimate in a Bloomberg survey of analysts.

China ended the first half of the year with a record trade surplus of about $586 billion after exports to the US began to stabilize, with factories riding out the tariff rollercoaster that upended global commerce. Exports rose 5.8% in June from a year earlier to $325 billion, exceeding the median estimate in a Bloomberg survey of analysts. Imports rose 1.1% to grow for the first time since February, according to data from the General Administration of Customs on Monday. Shipments to the US fell 16.1% from a year earlier after slumping by over 34% in May. Chinese firms were able to increase their sales in other markets to compensate for the drop to the US, with exports to the 10 Southeast Asian nations in the Asean group soaring 17% from a year earlier. Eric Zhu of Bloomberg notes "The pickup in China’s export growth in June was led by a rebound in shipments to the US after a temporary thaw in the trade war that brought down tariffs. The blip may not last long"

Takeaways by Macro Roundup® AI

  1. China posted a record first-half trade surplus of about $586 billion, with June exports up 5.8% from a year earlier to $325 billion, exceeding the median estimate in a Bloomberg survey of analysts.
  2. China's shipments to the US fell 16.1% in June from a year earlier after slumping more than 34% in May, while exports to the 10 Asean nations rose 17%, offsetting the US decline.
  3. Eric Zhu of Bloomberg attributes the June pickup in China's export growth to a rebound in shipments to the US after a temporary thaw in the trade war brought down tariffs, adding the blip may not last long.

Related Articles:

  • The US Trade Deficit and Foreign Borrowing — The authors argue US trade deficits persist because foreign investors find US financial assets attractive, but the current deficit level is not sustainable. They estimate that stabilizing the US net foreign liability position requires improving the trade balance by about 2% of GDP, or over 3% if low-cost borrowing privileges are lost.
  • Trade With China Is Becoming a One-Way Street — China's import volumes have shown no growth since the end of 2022 while its export volumes rose 33%, according to data from the Netherlands Bureau of Economic Policy Analysis. In dollar terms, Chinese imports fell 11% from the US, 17% from Japan, and 18% from Germany, as Chinese companies replace overseas suppliers with domestic ones.
  • China’s Stealth Trade Surplus — China's trade surplus has soared over the past five years, including a shift from a deficit to a large surplus in autos, with net vehicle exports exceeding 6m units, and dominance in renewables manufacturing. Its export volume growth has consistently exceeded global trade growth, consistent with economies leaning on exports after a real estate crisis weakens domestic demand.

AI Summary. The authors argue China is moving from follower to leader by aggressively contesting innovative sectors long dominated by the United States, including aviation, artificial intelligence, telecommunications, microprocessors, robotics, and nuclear and fusion power. They note the world's largest and most innovative makers of electric vehicles, EV batteries, drones, and solar wafers are all Chinese firms under 30 years old.

David Autor and Gordon Hanson New York Times
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Autor and Hanson warn the US faces a second “China Shock” that tariffs are ill-equipped to counter. According to an Australian analysis, btw 2003 and 2007, the US led China in 60 of 64 cutting-edge sectors; by 2023, China led the US in 57 of the 64.

Is China moving from follower to leader in innovative industries?

Core argument: The authors argue China Shock 2.0 will see China shift from underdog to favorite as it contests innovative sectors long led by the United States, including aviation, AI, telecommunications, microprocessors, robotics, and nuclear and fusion power.

China Shock 2.0, the one that’s fast approaching, is where China goes from underdog to favorite. Today, it is aggressively contesting the innovative sectors where the United States has long been the unquestioned leader: aviation, A.I., telecommunications, microprocessors, robotics, nuclear and fusion power. The world’s largest and most innovative producers of EVs (BYD), EV batteries (CATL), drones (DJI) and solar wafers (LONGi) are all Chinese start-ups, none more than 30 years old. They attained commanding technological and price leadership not because President Xi Jinping decreed it, but because they emerged triumphant from the economic Darwinism that is Chinese industrial policy. The rest of the world is ill prepared to compete with these apex predators. When U.S. policymakers deride China’s industrial policy, they are imagining something akin to the lumbering takeoff of Airbus or the lights going out on Solyndra. They should instead be gazing up at the nimble swarms of DJI drones buzzing over Ukraine.

Takeaways by Macro Roundup® AI

  1. The authors argue China Shock 2.0 will see China shift from underdog to favorite as it contests innovative sectors long led by the United States, including aviation, AI, telecommunications, microprocessors, robotics, and nuclear and fusion power.
  2. The world's largest and most innovative producers of EVs (BYD), EV batteries (CATL), drones (DJI) and solar wafers (LONGi) are all Chinese start-ups no more than 30 years old, according to the authors.
  3. The authors attribute these firms' technological and price leadership not to decrees from Xi Jinping but to the economic Darwinism of Chinese industrial policy, which U.S. policymakers imagine as lumbering Airbus-style takeoffs or Solyndra-style failures.

Related Articles:

  • Was Made in China 2025 Successful? — Chinese firms have narrowed the gap with foreign competitors across targeted industries, with China's share of global patents rising by more than 4 percentage points in electric vehicles, new materials, electronics, and robotics. Gaps remain in areas such as advanced semiconductors, where Chinese firms still lag the global frontier.
  • Will China Take Over the Global Auto Industry? — The global auto market has historically been regional, with most cars sold in a region also built there. Overcapacity in China's internal combustion sector, expanding electric-vehicle capacity, ample state bank credit, and a weaker yuan could concentrate global auto production in China absent restrictions such as the US 100% tariff on Chinese electric vehicles.
  • How Do U.S. Firms Withstand Foreign Industrial Policies? — U.S. firms in industries targeted for encouragement by China's Five-Year Plans show significant declines in employment, investment, and output beginning a year after a plan's release, with plant closures following a year later. The authors find firms with existing operations upstream or downstream of encouraged industries, or able to offshore into them, fare better.

AI Summary. The dollar is having its worst year since 1973, and the author argues that persistent large fiscal deficits and challenges to Federal Reserve independence imply significant further downside for a currency still trading above historical averages. Foreign investors hold very large dollar asset exposure, so a shift from currency hedging to outright selling could spur a self-reinforcing cycle of declines.

Joseph Wang Fed Guy Blog
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Investors are still very long dollar assets, even though some are starting to hedge or modestly reduce their exposure. Joseph Wang argues the dollar may have “much more to fall” if fiscal deficits are not reduced and a dovish Fed chair is appointed.

Does the dollar have significant further downside ahead?

Core argument: The dollar is having its worst year since 1973, yet still trades above historical averages, which the analysis argues leaves significant further downside.

The dollar is experiencing its worst year since 1973, but the policy trajectory and investor positioning suggest that there is much more to fall. The large and persistent fiscal deficit looks to continue, and the intensifying challenge to Fed independence will ultimately be resolved by the appointment of a Chair committed to low rates. These two factors alone imply significant downside to a dollar that is ultimately still just trading above historical averages. Foreign investors have so far tended to reach for FX hedges rather than outright repatriation, but that could change. The renewed tariff threats could spur further desire to diversify dollar exposure and contribute to an economic slowdown that dents the performance of U.S. assets. Foreign investors have very large exposure to dollar assets, so their selling has the potential to spur a cycle of dollar declines that prompt further sales of dollar assets.

Takeaways by Macro Roundup® AI

  1. The dollar is having its worst year since 1973, yet still trades above historical averages, which the analysis argues leaves significant further downside.
  2. A large and persistent U.S. fiscal deficit and the challenge to Fed independence, expected to be resolved by the appointment of a Chair committed to low rates, alone imply substantial dollar downside.
  3. Foreign investors have so far reached for FX hedges rather than outright repatriation, but their very large dollar asset exposure means their selling could spur a cycle of dollar declines that prompts further sales.

Related Articles:

  • The US Trade Deficit and Foreign Borrowing — The authors argue US trade deficits persist because foreign investors find US financial assets attractive, but the current deficit level is not sustainable. They estimate that stabilizing the US net foreign liability position requires improving the trade balance by about 2% of GDP, or over 3% if low-cost borrowing privileges are lost.
  • A Trump Risk Premium in the Dollar — Movements in the trade-weighted US dollar against other major currencies map almost entirely onto changes in forward interest-rate differentials, with the same positive relationship holding across periods despite noisier data. The author argues this leaves no discernible evidence of a separate political risk premium in the dollar.
  • Treasury Issuance Growing — US Treasury auction metrics show no current weakness in demand, with stable bid-to-cover ratios and no systematic tailing, even as debt-to-GDP rises, the term premium increases, and the government must refinance $9tn over the next year. The author argues Treasury issuance will keep outgrowing the economy, likely pushing long-term interest rates higher.

AI Summary. Long-term government bond yields rose in Japan, Germany, the UK and France as concern over widening fiscal deficits dented demand, with 30-year German yields near their highest levels in 14 years. Fiscal worries — including heavy government debt, spending, bond supply and sticky inflation — are displacing central-bank interest-rate policy as the main driver for these markets.

Alice Gledhill Bloomberg
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Japanese long bond yields rose, with the 20- and 30-year hitting 2.6% and 3.2%, respectively. Globally, long yields are rising. The US 30-year Treasury is approaching a 5% yield.

Are fiscal deficits replacing central banks as the driver of long-bond yields?

Core argument: Japan's 30-year yield jumped the most in two months, leading a global long-bond selloff, while 30-year German bund yields flirted with their highest levels in 14 years and US 30-year yields touched a one-month high.

Yields for long-term debt from Japan and Germany to the UK and France rose on Monday as growing concern over widening fiscal deficits dented demand. The yield on Japan’s 30-year notes jumped the most in two months and those on similar-maturity German bunds flirted with their loftiest levels in 14 years. For these countries fiscal concerns are usurping central-bank interest-rate policies as the main factor to watch. While the selloff is less pronounced in the US, 30-year yields there still touched the highest in a month. Japanese election largesse and Donald Trump’s weekend tariff announcements were the immediate cause of the latest nudge higher. They tapped into deeper concerns about excessive government debt, fire-hose spending, too many bonds coming to market, and inflation that’s still much too sticky in developed markets around the world.

Takeaways by Macro Roundup® AI

  1. Japan's 30-year yield jumped the most in two months, leading a global long-bond selloff, while 30-year German bund yields flirted with their highest levels in 14 years and US 30-year yields touched a one-month high.
  2. Fiscal concerns are usurping central-bank interest-rate policy as the main factor to watch for Japan, Germany, the UK and France, with widening deficits denting demand for long-term debt.
  3. Japanese election largesse and Donald Trump's weekend tariff announcements were the immediate cause of the yield rise, tapping into deeper concerns over excessive government debt, heavy bond supply and sticky inflation across developed markets.

Related Articles:

  • Japan’s Debt Trap — Japan's 30-year government bond yield has risen from 2.3% to just under 3.0%, matching Germany's despite Japanese government debt of 240% of GDP versus Germany's 64%. The author argues the Bank of Japan's continued bond purchases hold yields artificially low, and that market-set yields could reach 6–7%.
  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.
  • Foreign Treasuries Holdings Held Near a Record in April Turmoil — Foreign holdings of US Treasuries totaled $9.01tn, the second-highest on record and down $36bn from the prior month, with the decline mainly reflecting net sales of US notes and bonds by foreign private investors while official entities were net buyers of longer-term Treasuries. Japan remained the largest foreign holder at $1.13tn.

AI Summary. China's DJI accounts for about 70% of commercial drones sold globally, and industry experts estimate its output far exceeds that of any other manufacturer, with capacity in the millions of drones a year. About 500 US companies manufacture drones, producing fewer than 100,000 annually, according to an industry association.

Farah Stockman New York Times
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China’s DJI can manufacture millions of drones a year; about 500 American drone manufacturers are collectively building fewer than 100,000 drones annually.

Does China outproduce the US in drone manufacturing?

Core argument: DJI accounts for about 70% of all commercial drones sold globally for hobby and industrial uses such as aerial photography, package delivery and weather research, with industry experts estimating its output far exceeds that of any other drone manufacturer.

DJI accounts for about 70% of all commercial drones sold globally for hobby and industrial use, such as aerial photography, package delivery and weather research. The company declined to share market data, but industry experts estimate that DJI’s output far exceeds that of any other drone manufacturer. “No one even comes close,” said Bobby Sakaki, chief executive of UAS NEXUS, a drone industry consultant. “DJI can make millions of drones per year. That is a hundred times more than anybody in the United States can make.” About 500 companies manufacture drones in the United States, producing fewer than 100,000 a year, according to Ryan Carver, communications manager for the Association for Uncrewed Vehicle Systems International, a nonprofit organization of industry professionals.

Takeaways by Macro Roundup® AI

  1. DJI accounts for about 70% of all commercial drones sold globally for hobby and industrial uses such as aerial photography, package delivery and weather research, with industry experts estimating its output far exceeds that of any other drone manufacturer.
  2. About 500 U.S. companies manufacture drones and together produce fewer than 100,000 a year, according to Ryan Carver of the Association for Uncrewed Vehicle Systems International.
  3. Bobby Sakaki, chief executive of drone industry consultant UAS NEXUS, says DJI can make millions of drones per year, a hundred times more than any manufacturer in the United States can make.

Related Articles:

  • China Made Millions of Drones. Now It Has to Find Uses For Them — China accounts for 70-80% of global commercial drone supply and 79% of approved drone patents globally, according to industry analysts and a patent study. The Civil Aviation Administration of China projects the low-altitude economy, which includes flying cars, will grow fivefold to $490bn by 2035.
  • Ukraine Drone Strikes Hit Nuclear Bombers Deep Inside Russia — Ukraine used drones smuggled into Russia aboard trucks and released remotely from mobile wooden structures to strike strategic airfields as distant as eastern Siberia. An official in Ukraine's Security Service said more than 40 Russian aircraft, including Tu-95 and Tu-22 M3 long-range bombers and A-50 surveillance planes, were damaged, with losses assessed at at least $2bn.
  • A US Drone Maker Tries to Take Back the Country’s Skies — US drone maker Skydio has produced 45,000 drones in total, while Chinese rival DJI likely makes that many every few weeks — a scale gap that matters because production costs fall predictably with cumulative output. The Pentagon's Defense Innovation Unit says that at attrition rates observed in Ukraine, the US military would exhaust its entire drone supply in five days.

Tuesday, July 15, 2025

AI Summary. The authors estimate that a 1 percentage point rise in the federal debt-to-GDP ratio raises long-term nominal interest rates by about 3 basis points, roughly three-quarters of which reflects higher term premia. Applying this to a projected 56 percentage point increase in debt-to-GDP over 30 years implies long-term rates about 170 basis points higher.

Michael Plante, Alexander Richter and Sarah Zubairy National Bureau of Economic Research
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Researchers from the @DallasFed forecast that the 56pp projected increase in the US debt-to-GDP ratio over the next 30 years will boost long-term interest rates by about 170bps, implying yields of about 6% in 2055. Higher term premia would account for 120 of the 170 bps.

How much does rising federal debt raise long-term interest rates?

Core argument: The authors estimate that a 1 percentage point increase in the U.S. debt-to-GDP ratio raises long-term nominal interest rates by about 3 basis points, with term structure models indicating roughly three-quarters of that increase comes from higher term premia.

This paper revisits the relationship between federal debt and interest rates, which is a key input for assessments of fiscal sustainability. A common approach is to regress long-term forward interest rates on long-term projections of federal debt, [but the apparent disappearance of cointegration] over the last 20 years [leads us to estimate] the model in 1st differences. Our estimates indicate that a 1 percentage point increase in the debt-to-GDP ratio raises long-term nominal interest rates by about 3bps, with [the application of term structure models indicating] that about three-quarters of that increase is attributable to higher term premia. The CBO projects that the U.S. debt-to-GDP ratio will rise by 56 percentage points over the next 30 years. Holding other factors constant, our estimates suggest that the projected increase in debt would boost long-term interest rates by about 170 basis points. Given that the 5-year-ahead, 5-year Treasury rate averaged 4.35% in 2024, this would imply a rate of about 6% in 2055. Of this increase, approximately 120 basis points would stem from higher term premia, with the other 50 basis points reflecting an increase in expected short-term real rates.

Takeaways by Macro Roundup® AI

  1. The authors estimate that a 1 percentage point increase in the U.S. debt-to-GDP ratio raises long-term nominal interest rates by about 3 basis points, with term structure models indicating roughly three-quarters of that increase comes from higher term premia.
  2. Applying those estimates to CBO's projected 56 percentage point rise in the U.S. debt-to-GDP ratio over 30 years implies long-term interest rates about 170 basis points higher, holding other factors constant.
  3. With the 5-year-ahead, 5-year Treasury rate averaging 4.35% in 2024, the authors' estimates imply a rate of about 6% in 2055, of which roughly 120 basis points would stem from higher term premia and 50 basis points from higher expected short-term real rates.

Related Articles:

  • Can Treasury Markets Add and Subtract? — The authors estimate that Treasury yields rise on days when official cost estimates reveal deficit-increasing legislation, with a one-time 1 percentage point increase in the deficit-to-GDP ratio raising the 10-year yield by 0.75 basis points, or 6.75 basis points for a persistent deficit shock. The response reflects higher expected inflation and term premia alongside lower convenience yields.
  • Treasury Issuance Growing — US Treasury auction metrics show no current weakness in demand, with stable bid-to-cover ratios and no systematic tailing, even as debt-to-GDP rises, the term premium increases, and the government must refinance $9tn over the next year. The author argues Treasury issuance will keep outgrowing the economy, likely pushing long-term interest rates higher.
  • Brazil’s Slow-Burning Economic Crisis Might Be the U.S. Future — Brazil illustrates a feedback loop in which higher interest rates raise debt-servicing costs—now over 7% of GDP—which in turn lift risk premia and inflation expectations, making fiscal policy less sustainable still. U.S. long-term rates have not fallen despite Federal Reserve cuts, partly reflecting an $11tn debt increase and markets pricing the risk that debt is managed through higher inflation.

AI Summary. Japan's 30-year government bond yield remains below Germany's even after rising, despite Japanese government debt of 240% of GDP versus Germany's 65%. The author argues years of Bank of Japan quantitative easing and yield curve control, along with its continued gross purchases of government debt, keep Japanese yields artificially low.

Robin Brooks Robin Brooks Substack
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The Japanese 30-year yield is still below Germany’s, despite Japan’s debt/GDP of 240% relative to Germany’s 65%. The Bank of Japan is currently engaged in a yield control effort to manage rates.

Why are Japan's bond yields lower than Germany's despite far higher debt?

Core argument: Japan's 30-year government bond yield has hit new highs yet remains below Germany's, even though Japanese government debt stands at 240% of GDP versus Germany's 65%.

In recent days, Japan’s 30-year government bond yield has made new highs. The easiest way to see this is in the chart above, which shows Japan’s 30-year yield (white line) together with that for Germany (orange line). Even with the recent sharp rise, Japan’s yield is below Germany, which is nuts given Japan’s debt of 240% of GDP (versus Germany’s 65%). Many years of quantitative easing by the BoJ, as well as yield curve control, mean that Japan’s yields are still artificially low. And of course the BoJ remains a buyer of government debt in gross terms.

Takeaways by Macro Roundup® AI

  1. Japan's 30-year government bond yield has hit new highs yet remains below Germany's, even though Japanese government debt stands at 240% of GDP versus Germany's 65%.
  2. Years of Bank of Japan quantitative easing and yield curve control have left Japanese government bond yields artificially low, according to the author.
  3. The Bank of Japan remains a buyer of Japanese government debt in gross terms.

Related Articles:

  • Japan Leads Global Long-Bond Drop as Spending Takes Center-Stage — Long-term government bond yields rose in Japan, Germany, the UK and France as concern over widening fiscal deficits dented demand, with 30-year German yields near their highest levels in 14 years. Fiscal worries — including heavy government debt, spending, bond supply and sticky inflation — are displacing central-bank interest-rate policy as the main driver for these markets.
  • Global Debt Report 2025 — About 60% of fixed-rate government debt in advanced economies maturing by 2027 — roughly $9tn — was issued before the recent interest-rate tightening, with weighted average yields below 2% versus projected 10-year rates near 3.6%, implying refinancing at nearly double the original cost. France, Spain, the UK, and the US face heightened vulnerability, with maturing debt exceeding 15% of GDP.
  • Japan’s Debt Trap — Japan's 30-year government bond yield has risen from 2.3% to just under 3.0%, matching Germany's despite Japanese government debt of 240% of GDP versus Germany's 64%. The author argues the Bank of Japan's continued bond purchases hold yields artificially low, and that market-set yields could reach 6–7%.

AI Summary. Insurers are issuing catastrophe bonds, which transfer risk from events such as wildfires, hurricanes and earthquakes to bondholders, at a record pace, with issuance reaching $18.1bn against a prior full-year record of $17.7bn. A Swiss Re index of total returns on these bonds has risen 14% over the past year.

Lee Harris and Ian Smith Financial Times
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Total returns for catastrophe bonds have risen 14% y/y and 50% over the past five years, according to a Swiss Re’s index. Bondholders haven’t experienced significant losses despite insurer payouts running >$100B/year since 2020.

Are insurers transferring disaster risk to bondholders at a record pace?

Core argument: Catastrophe bond issuance has reached $18.1bn so far this year, surpassing the previous full-year record of $17.7bn set in 2024, according to specialist data provider Artemis.bm.

Insurers are selling so-called catastrophe bonds at a record rate as they seek to offload the growing risk from climate change onto investors eager for high returns. Issuance of the instruments, which transfer part of the risk for events such as wildfires, hurricanes and earthquakes to bondholders, has surged to $18.1bn so far this year. That compares with the previous record of $17.7bn for the whole of 2024, according to specialist data provider Artemis.bm. An industry-wide Swiss Re index of total returns from catastrophe bonds has risen 14% over the past year and by more than 50% over the past five years.

Takeaways by Macro Roundup® AI

  1. Catastrophe bond issuance has reached $18.1bn so far this year, surpassing the previous full-year record of $17.7bn set in 2024, according to specialist data provider Artemis.bm.
  2. Insurers are selling catastrophe bonds at a record rate to offload growing risk from climate change onto investors seeking high returns, transferring part of the exposure to events such as wildfires, hurricanes and earthquakes to bondholders.
  3. An industry-wide Swiss Re index of total returns from catastrophe bonds has risen 14% over the past year and by more than 50% over the past five years.

Related Articles:

  • The World Is Getting Riskier. Americans Don’t Want to Pay for It — Americans' resistance to paying to insure against risks from illness, old age, and natural and financial disasters is growing alongside those risks; JPMorgan estimated wildfires around Los Angeles caused $50bn in losses, of which only $20bn were insured. Socializing risk removes the price signal that encourages the insured to mitigate their own exposure.
  • Catastrophe Bonds Look Set to Dodge Losses as LA Fires Rage — Catastrophe bonds, which insurers use to transfer risk to capital markets and which pay out only when cumulative losses over a year exceed a preset threshold, are unlikely to incur significant losses from wildfires in Los Angeles. The Swiss Re Global Cat Bond Index gained more than 17% in 2024, following a record near-20% return in 2023.
  • Reinsurers Little Exposed to LA Fires After Retreat From Disaster Risks — Citi analysts estimate reinsurers could absorb less than 3% of insured losses from the Los Angeles wildfires. Reinsurers' share of modelled catastrophe risk has fallen from about 46% over the past 25 years to 33%, following years of wildfire losses that led major reinsurers to reduce their appetite for such risks.

AI Summary. Analysis of US Current Population Survey data shows the retired share of the population rose at a roughly linear rate in the decade before the COVID-19 pandemic, reflecting the baby boomer generation reaching retirement age. Over that period the actual retired share tracked the demographic trend line within narrow bounds.

Miguel Faria-e-Castro, Serdar Birinci, Kurt See and Gus Gerlach Federal Reserve Bank of St. Louis
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During the pandemic era “Great Retirement Boom,” >2.4mm people retired in excess of trend, @mfariacastro finds. As of 2024, retirements had reverted to their prepandemic trend.

Does the retired share of the population follow its demographic trend?

Core argument: The U.S. retirement share rose at a roughly linear rate from 2008 to February 2020 in Current Population Survey data, reflecting the baby boomer generation reaching retirement age.

Using CPS data, the figure shows the share of the population that is retired. The linear trend line fitted to the data from June 2008 to February 2020—is designed to represent the retirement share based on demographic trends, in the absence of economic fluctuations and other factors that could affect people’s decisions to retire or not (such as a public health emergency like COVID-19). The trend is estimated starting in 2008—the first year in which the oldest baby boomers turned 62 and thus became eligible to collect Social Security benefits—and ending in February 2020, which is the final full month before the outbreak of the COVID-19 pandemic in the U.S. The retirement share increased at a roughly linear rate between 2008 and 2020, reflecting the baby boomer generation reaching retirement age. Pre-2020, the retirement share closely follows the trend line, orbiting above or below the linear trend within narrow bounds.

Takeaways by Macro Roundup® AI

  1. The U.S. retirement share rose at a roughly linear rate from 2008 to February 2020 in Current Population Survey data, reflecting the baby boomer generation reaching retirement age.
  2. The linear trend line is fitted from June 2008, the first year the oldest baby boomers turned 62 and became eligible for Social Security benefits, through February 2020, the last full month before the COVID-19 outbreak in the U.S.
  3. Before 2020, the retirement share closely followed the fitted linear trend, moving above or below it within narrow bounds, with the trend intended to represent demographic developments absent economic fluctuations and other factors affecting retirement decisions.

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  • Pandemic Labor Force Participation and Net Worth Fluctuations — Applying the pre-pandemic peak labor force participation rate to the adult population implies about 3.73m "missing workers" and 3.27m "excess retirees" in the US economy. The authors estimate that wealth effects on retirement decisions among those aged 55 and over account for over 50% of the aggregate participation decline and more than 80% of excess retirements.
  • Another ‘Great Retirement’ Wave Hits the US After Stocks Rally — The US has roughly 2.7m more retirees than predicted by a Federal Reserve Bank of St. Louis model, with the number of retirees reaching a post-pandemic record. Financial market performance appears to have played a role, as stocks rebounded 24% and home prices rose across most US metro areas, bolstering older Americans' wealth.
  • Analysis of the 2024 Social Security Trustees’ Report — The Social Security Trustees project the retirement trust fund will deplete its reserves by 2033, triggering a 21% across-the-board benefit cut, with the combined retirement and disability funds insolvent by 2035 and a 17% cut. Restoring 75-year solvency would require the equivalent of a 27% payroll tax increase or a 21% benefit reduction.

AI Summary. Chinese electric-vehicle maker BYD has unveiled an advanced driver-assistance system and a battery charging system it says adds about 470km of driving range in five minutes, a fraction of the time Tesla would require. Legacy carmakers have responded by partnering with Chinese rivals to learn to build vehicles faster, cheaper, and with better software.

Kana Inagaki, Edward White and Stephen Morris Financial Times
Date Posted:

In 2024, BYD sold 4.27mm cars, a 10-fold increase in four years; 1.76mm were pure EVs, almost on par with Tesla’s 1.79mm. Over those four years, Tesla’s production rose only 3.6x. Both firms are focusing on autonomous driving.

Have Chinese EV makers moved ahead on technology, not just price?

Core argument: BYD announced a battery charging system that adds roughly 470km of driving range in five minutes, a fraction of the time a Tesla would take to charge to that level.

Until recently, the main advantage Chinese EV manufacturers had over Tesla was that their products were significantly cheaper. But in February, BYD’s founder Wang Chuanfu stood on stage in Shenzhen and unveiled “God’s Eye”, an advanced driver-assistance system that is a precursor to fully autonomous vehicles. A month later, Lian, who now heads BYD’s automotive engineering research institute, was on stage with Wang to announce a new battery charging system capable of adding a driving range of about 470km in five minutes — a fraction of the time it would take a Tesla to charge to that level. The startling technological advances made by BYD and others have sparked panic among legacy carmakers, who have responded by partnering with Chinese rivals to learn how to build vehicles faster and cheaper, and with better software.

Takeaways by Macro Roundup® AI

  1. BYD announced a battery charging system that adds roughly 470km of driving range in five minutes, a fraction of the time a Tesla would take to charge to that level.
  2. BYD founder Wang Chuanfu unveiled "God's Eye" in Shenzhen in February, an advanced driver-assistance system that is a precursor to fully autonomous vehicles.
  3. Chinese EV makers' main advantage over Tesla had been significantly cheaper products, and technological advances by BYD and others have prompted legacy carmakers to partner with Chinese rivals to build vehicles faster, cheaper and with better software.

Related Articles:

  • Will China Take Over the Global Auto Industry? — The global auto market has historically been regional, with most cars sold in a region also built there. Overcapacity in China's internal combustion sector, expanding electric-vehicle capacity, ample state bank credit, and a weaker yuan could concentrate global auto production in China absent restrictions such as the US 100% tariff on Chinese electric vehicles.
  • China Delays Approval of BYD’s Mexico Plant Amid Fears Tech Could Leak to US — China's commerce ministry has withheld the approval that domestic automakers need to manufacture abroad, holding up BYD's planned Mexican car plant, which the company said would create 10,000 jobs and build 150,000 vehicles a year. Officials are concerned that Mexico's proximity to the US could give Mexico, and possibly the US, access to BYD's advanced technology and knowhow.
  • Cheap Chinese Cars Are Taking Over Roads From Brazil to South Africa — Inexpensive cars from Chinese makers such as BYD, Chery, Great Wall and SAIC are gaining share in emerging markets, reaching nearly 10% of sales in South Africa, 8% in Turkey and close to a third in Chile. Chinese automakers' market share outside China is projected to rise to 13% by 2030 from 3%.

AI Summary. Apple has agreed to a $500m deal to buy rare-earth minerals from US producer MP Materials, which has secured Pentagon backing, and the two firms will build a Texas factory with neodymium magnet lines tailored for Apple products. Western producers including MP Materials and Australia's Lynas have struggled to profit amid weak prices and oversupply.

Carlos Caminada Bloomberg
Date Posted:

Apple will start purchasing rare-earth minerals from MP Materials, and along with MP Materials, will build a factory in Texas with neodymium magnet manufacturing lines tailored for Apple products.

Can corporate deals make US rare-earth production profitable?

Core argument: Apple struck a $500 million deal to buy rare-earth minerals from MP Materials, the US producer that secured Pentagon backing the prior week.

Apple has struck a $500 million deal to buy rare-earth minerals from MP Materials Corp., the US producer that just last week secured backing from the Pentagon. The two companies will build a factory in Texas, with neodymium magnet manufacturing lines tailored for Apple products, the iPhone maker said Tuesday in a statement. Apple said the spending on rare-earth minerals is part of its earlier pledge to invest more than $500 billion in the US over the next four years. While the [Chinese] export halt boosted prices and sparked fears of shortages, over the longer run western producers like MP Materials and Australia’s Lynas Rare Earths have struggled to turn a profit due to weak prices and oversupply.

Takeaways by Macro Roundup® AI

  1. Apple struck a $500 million deal to buy rare-earth minerals from MP Materials, the US producer that secured Pentagon backing the prior week.
  2. Apple and MP Materials will build a Texas factory with neodymium magnet manufacturing lines tailored for Apple products, spending Apple counts toward its pledge to invest more than $500 billion in the US over four years.
  3. The Chinese export halt boosted rare-earth prices and sparked shortage fears, while western producers including MP Materials and Australia's Lynas Rare Earths have struggled over the longer run to turn a profit due to weak prices and oversupply.

Related Articles:

  • Pentagon to Take Stake in Rare-Earth Company, Challenging China’s Control — Under a deal with the largest U.S. rare earths miner, the Defense Department will take a 15% stake, commit billions of dollars to investment and output purchases, and guarantee a price floor for rare earth minerals and magnets. The agreement calls for a new magnet factory, expected online in 2028, at a scale far exceeding current U.S. magnet production.
  • China’s Weaponisation of Rare Earths is a New Kind of Trade War — China's export controls on rare earth materials and magnets threatened to halt production across the auto industry, the largest manufacturing sector in most advanced economies, and forced Washington to negotiate on tariffs. Despite China's well-known dominance of rare earth production, Western governments and companies have not developed alternative suppliers.
  • China Found World’s Pain Point on Trade – and Will Use It Again — China's export permitting system for rare earths and other critical minerals is detailed enough that Beijing is developing a granular understanding of where every kilogram it produces ends up and why. Bottlenecks emerged as China slowed approvals for magnets containing even minuscule amounts of seven rare earths, alongside limits on sales of the raw elements.