Edward Conard

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Are Corporate Payouts Abnormally High in the 2000s?

Kathleen Kahle National Bureau of Economic Research
Date Posted:
July 1, 2020
Is Database:
Database

Corporate payouts in the 2000s are significantly higher than in previous decades, driven by both higher earnings & payout rates. 38% of increase due to higher earnings, 62% due to higher payout rates. @KathleenKahle

Corporate payouts in the 2000s are significantly higher than in previous decades, with annual aggregate real payouts averaging three times their pre-2000 level. This increase is driven by both a rise in firms' earnings and a higher payout rate, with 38% of the increase attributed to greater earnings and 62% to an elevated payout rate. From 2000 to 2017, companies paid out nearly $10 tn, with net payouts averaging 4.1% of corporate assets compared to 2.7% from 1971 to 1999. The ratio of net payouts to operating income also rose from 18.9% to 32.4%. Larger and older firms, which are more prevalent in the 2000s, contribute to this trend, as they typically have higher payouts. Despite changes in firm characteristics explaining much of the increase, models based on data from 1971-1999 underpredict the actual rise, suggesting other factors like tax law changes and cross-market arbitrage also play a role.

Well-trod ground new NBER research finds no evidence that buybacks reduce investment though there is a negative relationships btw payouts and investment, firms in the top 10% of payout distribution had higher returns than firms in bottom 90%.

“….In this paper, we show that payouts in the 2000s are sharply higher than from 1971 to 1999, whether we look at constant dollar aggregate payouts or firm-level payouts. The increase in payouts comes about both through an increase in payout rates and through an increase in funds available for payouts. Thirty seven percent of the increase in aggregate constant dollar payouts is explained by an increase in constant dollar aggregate operating income while sixty-three percent of the increase is explained by an increase in the payout rate…. The companies in our sample pay out almost $10 trillion from 2000 to 2017 - gross payouts are $10,823 billion and net payouts, which net out equity issues by repurchasing firms, are $9,862 billion. In the 2000s, annual aggregate real payouts average roughly three times their pre-2000 level. Aggregate net payouts as a percentage of aggregate corporate assets also increase substantially, averaging 2.7% from 1971 to 1999 versus 4.1% from 2000 to 2017. When we examine the ratio of aggregate net payouts to aggregate operating income, we see a similar increase; the average ratio increases from 18.9% to 32.4%. The year 2018 stands out, as aggregate net payouts as a percentage of aggregate corporate assets are 6.2% and aggregate payouts as a percentage of operating income are 48.4%. We show that payouts increase both because firms’ capacity to pay increases and because their willingness to pay increases. Specifically, in the aggregate, 38% of the increase in payouts is due to the fact that firms earn more and 62% is explained by the fact that firms have a higher payout rate. To explain the increase in payouts, it is therefore essential to explain why the payout rate increases. … Dividends average 14.4% of operating income from 1971 to 1999 and 14% from 2000 to 2017. In contrast, net repurchases average 4.8% of operating income before 2000 and 18.3% from 2000 to 2017….The aggregate level of payouts in the 2000s can be explained well using a model available in the literature estimated on data from 1971 to 1999 to predict payouts in the 2000s conditional on actual determinants of payouts in the 2000s. For instance, this model estimated with data from 1971 to 1999 overpredicts payouts in 2017 by 6%. As documented in Kahle and Stulz (2017), firm characteristics change substantially over time. Specifically, firms in the 2000s are larger and older than firms over the period 1971-1999. Larger and older firms have higher payouts, so changes in firm characteristics imply an increase in payouts and payout rates….We find similar results for aggregate net payouts. In 2018, ten firms account for more than 25% of the aggregate net payouts in our sample. Fewer than 10% of firms make 90% of the aggregate net payouts. For example, before 2000, on average, the net payouts of 338 firms amount to 90% of the net payouts of all firms. In the 2000s, 90% of net payouts come from the top 248 payers. Another way to see that aggregate net payouts reflect the actions of few firms is to look at the net payouts of firms who pay out more than $100 million in 2017 dollars. In 2018, these firms represent 21.7% of the firms in our sample…To investigate how much of the increase in payouts can be explained by changes in firm characteristics, we estimate payout rate models on data from 1971 to 1999 that relate payouts to firm characteristics. We then use these models to predict payout rates in the 2000s given actual firm characteristics. Models estimated from 1971 to 1999 predict an increase payout rates for the 2000s because of changes in firm characteristics, but they do not predict an increase as large as the actual increase. For the firms for which we have adequate data to predict the payout rate, the payout rate increases from 12.9% to 20.2% from before the 2000s to the 2000s. Changes in firm characteristics explain 71% of that increase.Models estimated with data from 1971 to 1999 are less successful in estimating the increase in payout rates for firms that have payouts. For these firms, the payout rate increases by 10.8%. Of this increase, changes in firm characteristics explain 49% of the increase. However, the predicted average payout rate for firms with payouts is always below the actual payout rate in the 2000s. We investigate whether the underprediction can be explained by the tax law changes that affect multinationals and by cross-market arbitrage. We find that both tax law changes and cross-market arbitrage explain part of the large prediction errors of our models. The question this paper tries to answer is whether payouts in the 2000s are abnormal. The answer is that much of the increase in payouts can be explained by known determinants of payouts. However, these models do a better job in explaining the evolution of aggregate payouts than they do in explaining the payouts of individual firms. A plausible explanation is that aggregate payouts reflect the payouts of the largest payers. These payouts may be more predictable over time. There is evidence that part of the increase in the payout rate can be explained by the fact that firms are more sensitive to determinants of payouts in the 2000s. In other words, if a firm’s payout rate is positively related to a firm characteristic before 2000, it is more strongly related to that firm characteristic in the 2000s. An increase in the sensitivity of payouts could be a positive development if it means that firms are less likely to hoard funds internally that could be invested more profitably outside the firm. Alternatively, however, such an increase could be problematic if it means that firms are more reluctant to take advantage of valuable internal investment opportunities. However, while our study does not provide tests that would establish or reject a causal relation between capital expenditures and payouts, it is noteworthy that even if one were to argue that firms decreased capital expenditures to increase payouts, this effect would explain little of the increase in payouts given the weak relation between capital expenditures and payouts….”

Are Corporate Payouts Abnormally High in the 2000s?: Extended Excerpt Image 1

Are Corporate Payouts Abnormally High in the 2000s?: Extended Excerpt Image 2


Kathleen Kahle and René Stulz, "Are Corporate Payouts Abnormally High in the 2000s?," National Bureau Of Economic Research, April 2020, https://www.nber.org/papers/w26958

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Previous articleJuly 1, 2020Populists Dont Know Much About Private EquityPrivate equity returns have outperformed the market by over 5% annually, with $300bn invested in 2018 projected to yield an excess social return of over $100bn over 7 years.Next articleJuly 3, 2020The Economic Effects Of Private Equity BuyoutsPrivate equity buyouts lead to a 1.7% decline in compensation per worker, but labor productivity increases by an average of 8% post-buyout.
Showing 241 database articles primarily about Financial Markets

World’s Unusually High Dollar Exposure Risks Fueling Selloff

AI Summary. Global institutional investors hedge only 41% of their foreign-currency exposure — the lowest rate since at least 2015 — leaving portfolios heavily exposed to dollar depreciation. A sudden shift in sentiment could trigger a self-reinforcing dollar selloff as unhedged holders rush to reduce exposure simultaneously.

Ruth Carson, Masaki Kondo, and Anya Andrianova Bloomberg
Date Posted:
September 3, 2026
Is Database:
Database

A Bloomberg analysis finds only 41% of global investors’ foreign-currency exposure is hedged in six major markets, the lowest level since 2015. Foreigners now hold almost $40T of American assets.

Are unhedged dollar positions setting up a market crash?

Core argument: Global institutional investors hedged just 41% of their foreign-currency exposure as of June 30—the lowest share since at least 2015—leaving dollar-denominated assets acutely vulnerable to a sentiment-driven selloff.

Sift through the filings of pension funds and insurers around the world and one thing stands out: some of the biggest holders of US assets have little protection against a weaker dollar, leaving the currency at risk of steeper declines if sentiment suddenly turns. Across markets [Canada, Denmark, Australia, Taiwan, Japan and Finland for which data is available] investors hedged just 41% of their foreign-currency exposure as of June 30 — the lowest since at least 2015. While not a complete picture, it offers a glimpse into how the sudden rush last year to hedge against dollar losses triggered by President Donald Trump’s global tariff rollout has faded as the US currency slowly stabilized.

Takeaways by Macro Roundup® AI

  1. Global institutional investors hedged just 41% of their foreign-currency exposure as of June 30—the lowest share since at least 2015—leaving dollar-denominated assets acutely vulnerable to a sentiment-driven selloff.
  2. The retreat from peak hedging activity reflects fading demand for dollar-loss protection after the U.S. currency stabilized following the tariff-driven shock, compressing a key buffer against renewed depreciation.

Related Articles:

  • Financial Innovation and the International Monetary System — The U.S. dollar accounts for 59% of international payment values routed through SWIFT and ~90% of global foreign exchange turnover, while the Chinese renminbi has risen to 9% of foreign exchange turnover by displacing other major currencies, not the dollar.
  • The Global Balance Sheet 2026: Imbalance And Divergence — Paper wealth — asset price gains detached from real investment — drove nearly 60% of global household wealth growth in 2025, up from one-third historically. Only 20% came from net new real investment, compared to a 30% historical average.
  • Momentum, Rotation and the Value in Growth — Noting US underperformance relative to the world since the start of 2025, and the fact that the 5 largest US stocks now have a P/E only marginally above that…
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What Are U.S. Treasury Markets Really Telling Us? Part II

AI Summary. 54 percentage point yield increase since 2022. The shift reflects reduced Federal Reserve absorption of long-duration debt, forcing private investors to demand greater compensation for interest rate risk.

Hanno Lustig The Two Cents
Date Posted:
September 1, 2026
Is Database:
Database

Lustig presents a decomposition that attributes 156bp of the 254bp rise in the 10-year yield since March 2022 to an increase in the term premium, which he associates with the additional duration risk borne by investors as the Fed reduced its balance sheet.

Does reduced Fed demand for long-duration debt explain rising Treasury yields?

Core argument: Term premium accounts for 1.56 percentage points — nearly two-thirds — of the 2.54-point rise in the 10-year Treasury yield since March 2022, dwarfing the 98-basis-point contribution from rising expected short rates.

I plot a decomposition of the increase in the 10-year yield into a term premium component and a future short rate component. According to this measure, a big chunk —1.56 pps (or nearly 2/3 rds)— of the 2.54 pps increase in the 10-year yield since March 2022 is actually due to an increase in the term premium. That premium (the red line in the figure) turned negative around 2015, and [when] it bottomed out in 2020, yields (black line) were trading 135 bps below the path of future short rates (blue line). That’s not entirely surprising: The Fed was absorbing a large share of Treasury issuance at the long end of the yield curve —as well as MBS issuance— effectively removing a great deal of interest rate risk from the market.

Takeaways by Macro Roundup® AI

  1. Term premium accounts for 1.56 percentage points — nearly two-thirds — of the 2.54-point rise in the 10-year Treasury yield since March 2022, dwarfing the 98-basis-point contribution from rising expected short rates.
  2. The term premium bottomed at -1.355% in 2020, when Fed absorption of long-end Treasury and MBS issuance stripped duration risk from the market and pushed yields 135 basis points below the expected path of short rates.
  3. The term premium’s steady climb since 2022 signals that investors now demand compensation for bearing interest rate risk rather than paying for the privilege, reversing a multi-year structural distortion created by quantitative easing.

Related Articles:

  • What Are Bond Markets Telling Us? — U.S. bond market indicators, including long-term inflation expectations and default insurance prices, show no meaningful rise in concern about government insolvency or debt sustainability.
  • What Are US Treasury Markets Really Telling Us? Part I — Lusting agrees with Krugman that low CDS prices on Treasurys argue against default panic, but finds them a weak signal. Constructing synthetic Treasuries from…
  • America’s Risky Debt: What Markets See That Policymakers Don’t — The safety premium that investors historically paid for US government bonds over equivalent alternatives has compressed toward zero and, at longer maturities, reversed — with global investors now pricing foreign government bonds as safer than US Treasurys.
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Is the AI Buildout Pushing Up Yields?

AI Summary. Heavy corporate investment in new technology can shift businesses from net savers to net borrowers, absorbing household savings and widening the current account deficit, as occurred during the early-2000s technology boom.

Robin Brooks Robin Brooks Substack
Date Posted:
August 27, 2026
Is Database:
Database

Brooks argues, “The AI buildout isn’t why government bond yields are rising,” noting the US non-financial corporate sector was a net saver as of Q1 2026, which suggests government deficit spending is driving up long yields.

Does massive technology investment shift corporations from savers to borrowers?

Core argument: Government dissaving—not corporate capital expenditure—is the primary driver of U.S. domestic savings consumption and current account deterioration.

The chart shows quarterly data for the US saving-investment balance going back to 1990. This is an identity that apportions the current account balance into net saving in various sectors of the economy. Households tend to be net savers, as is the financial sector and non-financial corporates. The government tends to be a net borrower. The last time we had a lot of excitement about technological innovation and higher productivity growth was in the “IT bubble” of the early 2000s, which saw non-financial corporates flip from being net savers to borrowers, i.e. the capex buildout at the time was very large and - for a few years - accounted for the entire current account deficit. Nothing like that’s happening now. It’s government dissaving, i.e. the budget deficit, that’s eating up resources, while the non-financial corporate sector stayed a net saver in data through the first quarter of this year.

Takeaways by Macro Roundup® AI

  1. Government dissaving—not corporate capital expenditure—is the primary driver of U.S. domestic savings consumption and current account deterioration.

Related Articles:

  • AI Is Driving Up Treasury Yields: ‘It Just Touches Everything’ — Heavy corporate bond issuance driven by AI investment has reduced demand for long-term government debt, pushing 10-year Treasury yields up ~0.3 percentage points as investors rotate into higher-yielding corporate bonds.
  • The Other US Capex Question — Weak non-AI business investment in the U.S. is driven primarily by near-zero labor force growth from tightened immigration policy, not by AI spending crowding out capital, since corporate savings are sufficient to fund both simultaneously.
  • Corporate America Is Minting Money—and Not Just in Tech and Finance — S&P 500 earnings per share are growing above 13% year-over-year for the sixth consecutive quarter, with sales rising at the fastest pace since late 2022 and margins expanding across most sectors. The gap between earnings-per-share growth and net income growth has narrowed to under 1 percentage point, indicating profit gains
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Bessent Bounce Starts to Emerge in Long Bond Market Metrics

AI Summary. The gap between long-term government bond yields and equivalent swap rates has narrowed to its smallest in months, reflecting increased investor willingness to hold long-dated government debt following expanded buybacks of longer-dated bonds.

Greg Ritchie and Elizabeth Stanton Bloomberg
Date Posted:
August 26, 2026
Is Database:
Database

Modest compression of the spreads between Treasury yields and synthetic “swap” securities (~5.5bp for the 30 year and ~3bp for the 10 year) suggest Bessent’s Treasury purchase program has had a degree of success at lowering long-term government yields.

Are investors returning to long-term government bonds?

Core argument: The 30-year Treasury-swap spread narrowed to its smallest since February following Bessent’s announcement, as Treasuries outperformed equivalent-maturity swaps and benchmark yields drifted lower.

Since Bessent’s announcement, Treasuries have outperformed equivalent-maturity swaps, narrowing the 30-year spread to the smallest since February. Swaps are popular with some investors as an alternative to owning bonds; the gap between [swap rates] and US government yields [gauges] how willing [investors] are to hold Treasuries instead. The 10-year swap spread has compressed too, with the gap three basis points smaller at around 38 basis points. Still, the recent drop has only dented a years-long rise in long-term US government borrowing costs. The 10-year US yield inched up 3bp to 4.66% after touching 4.75% last week. “While conducting buybacks at the long end of the yield curve may technically decrease yields, higher structural US budget deficits, which [require] a significant supply of Treasuries to finance the US debt, [are] not changing anytime soon,” said Libby Cantrill, head of public policy at Pimco.

Takeaways by Macro Roundup® AI

  1. The 30-year Treasury-swap spread narrowed to its smallest since February following Bessent’s announcement, as Treasuries outperformed equivalent-maturity swaps and benchmark yields drifted lower.
  2. The Treasury’s plan to at least double longer-dated bond buybacks drove the repricing.
  3. the swap-yield gap—a direct gauge of investor preference for Treasuries over derivatives—compressed in response.

Related Articles:

  • Let the Bond Market Speak — Treasury intervention in a functioning bond market suppresses the price signal that transmits collective market information to decision makers, removing the mechanism by which orderly volatility performs its intended economic function.
  • US 30-Year Bonds Erase Gains From Treasury’s Buyback Surprise — US government bond yields have returned to near two-decade highs despite a buyback program targeting long-dated debt, indicating that investor concern over rising government borrowing remains unresolved.
  • America’s Risky Debt: What Markets See That Policymakers Don’t — The safety premium that investors historically paid for US government bonds over equivalent alternatives has compressed toward zero and, at longer maturities, reversed — with global investors now pricing foreign government bonds as safer than US Treasurys.
  • Financial Markets
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    • Fiscal Deficits
    • Government Spending
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America’s Risky Debt: What Markets See That Policymakers Don’t

AI Summary. The safety premium that investors historically paid for US government bonds over equivalent alternatives has compressed toward zero and, at longer maturities, reversed — with global investors now pricing foreign government bonds as safer than US Treasurys.

Hanno Lustig Aspen Economic Strategy Group
Date Posted:
August 21, 2026
Is Database:
Database

Lustig shows the premium investors pay for Treasurys over substitutes such as AAA corporate debt and G10 sovereign debt has compressed post 2020. “Investors are now indifferent between [Treasurys] and close substitutes.”

Are global investors losing confidence in US government debt safety?

Core argument: The U.S. Treasury safety premium has compressed to near zero post-2022 and at points reversed, signaling that markets no longer treat Treasurys as unambiguously superior to credit-risk-adjusted corporate equivalents.

The top panel uses the credit risk-adjusted AAA-Treasury spread. We use the CDS to strip the default-risk compensation out of the corporate-bond yield. What remains is a clean estimate of the safety premium that investors pay for Treasurys over otherwise-equivalent corporate exposure. Post-2022, it has compressed toward zero, and at points, has reversed. The bottom panel uses the Treasury Premium, defined as the difference between the synthetic-dollar foreign sovereign yield and the US Treasury yield at the same maturity. The synthetic-dollar foreign yield is constructed by swapping the coupon payments on foreign G10 sovereign bonds into dollars using the foreign-exchange forward market. This eliminates currency risk over the life of the bond, so the resulting dollar cash-flow stream is directly comparable to a US Treasury yield of the same maturity. At longer maturities, global investors now seem to prefer the safety of foreign G10 bonds.

Takeaways by Macro Roundup® AI

  1. The U.S. Treasury safety premium has compressed to near zero post-2022 and at points reversed, signaling that markets no longer treat Treasurys as unambiguously superior to credit-risk-adjusted corporate equivalents.
  2. At longer maturities, global investors now price dollar-hedged G10 sovereign bonds above U.S. Treasurys, marking a structural erosion of the safe-haven premium that has historically anchored U.S. borrowing costs.

Related Articles:

  • The United States Capital Structure — Government bondholders hold the riskiest position in the U.S. fiscal structure, absorbing adverse shocks through inflation or financial repression, while entitlement recipients function as senior claimants whose payments are politically protected.
  • Are Government Bonds Safe in Times of War and Pandemic? — US government bonds, normally safe assets, become risky in times of war because of negative real returns due to bursts of inflation. As in the fiscal theory of…
  • U.S. Treasury Investors Are Long in AI — U.S. government debt acts as a leveraged bet on long-run productivity growth, because tax revenue rises automatically with faster growth while spending commitments stay flat. Each 0.1 percentage point increase in permanent productivity growth raises the fundamental value of government debt by $1.3tn, implying a 71 basis point decline in
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Yen Intervention = US Self-Preservation

AI Summary. Japan holds $1tn in U.S. government bonds — the largest foreign position globally — giving the U.S. a strong incentive to support a stronger yen rather than risk Japan selling those bonds or raising rates sharply enough to redirect domestic capital away from U.S. debt markets.

Katie Martin Financial Times
Date Posted:
August 4, 2026
Is Database:
Database

To shield Treasuries from selloffs and higher yields, the US prefers its own yen support tools: ESF yen purchases as a signal and the Fed’s rarely used FIMA facility, lending Japan dollars against Treasuries to forestall direct Japanese Treasury sales.

Does the U.S. need a stronger yen to protect its debt markets?

Core argument: Japan’s $1 trillion in U.S. Treasury holdings—the world’s largest foreign position at ~4% of total outstanding—give the U.S. a direct strategic interest in defending the yen, as Japanese dollar sales would intensify pressure on a 10-year yield already at 4.7%.

Japan has two traditional routes to push up the battered yen. One is a massive rise in Japanese interest rates, and the other is massive sales of dollars — i.e., of US Treasuries. Neither would be good news for the US. Japanese yields are already seriously elevated by historical standards — 2.8% on the 10-year and 4% on the 30-year. The US is just not in a position to lose a big buyer of Treasuries when its own 10-year yield is tickling 4.7% and the 30-year is well over 5. And it certainly can’t tolerate a big seller of Treasuries, in the form of Japanese authorities selling dollars, hoping to prop up the yen. (Japan’s Treasury holdings already lead the world, at $1tn, or just below 4% of the total outstanding.) Much better to stand behind Japan and hope to scare off the yen sellers. Recent use has been made of the Exchange Rate Stabilization Fund [ESF] to signal that intent. Bessent has also said he will encourage the Fed to bump up Fima, the Fed’s international repo facility, in the coming months. This tool has rarely been wheeled out since it was established during the 2020 Covid shock. Its current $60bn per counterparty, per day limit has been reached just once. The fact that US authorities approved the use of this facility suggests the US side sees potential risk that fx intervention could push up US Treasury yields.

Takeaways by Macro Roundup® AI

  1. Japan’s $1 trillion in U.S. Treasury holdings—the world’s largest foreign position at ~4% of total outstanding—give the U.S. a direct strategic interest in defending the yen, as Japanese dollar sales would intensify pressure on a 10-year yield already at 4.7%.
  2. U.S. participation in Friday’s joint yen intervention, executed via euros from the Exchange Stabilization Fund, delivers a credible “back off” warning to yen sellers without triggering the Treasury market disruption that direct dollar sales would cause.
  3. Japan’s 10-year yield at 2.8% and 30-year at 4%—elevated by historical standards—redirect domestic capital away from U.S. Treasuries, compounding Washington’s vulnerability at a moment when its 30-year yield exceeds 5%.

Related Articles:

  • US and Japan Aim to Transform Yen Landscape With Joint Moves — A coordinated currency intervention by the US and Japan to strengthen the yen exceeded the scale of previous joint efforts, with Japan alone spending an estimated $53bn in a single day.
  • Shadow Government Bond Yields in the G10 — Government bond yields across major economies are artificially suppressed by central bank intervention; if those interventions were removed, long-term yields would rise materially above current market levels.
  • Global Debt Report 2026 — Across the OECD last year, $13.5T of governmental debt needed refinancing, 70% ($9.5T) of which was US debt, up from 57% in 2020. The US and Japan were…
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