ABSTRACT Nominal yield can be decomposed into real rates, inflation expectations, and inflation risk premia. We estimate an affine term structure model that allows us to decompose nominal bond yields and use the model to study Korea–US exchange rate movements. Our results show that expected inflation and the inflation risk premium have considerable predictive power for Korea–US exchange rates beyond other yield curve factors and macro-variables. In particular, we find that those two nominal factors play a stronger role after 2005. It implies that not only the level of inflation but also inflation uncertainty should be taken into account for predicting Korea–US exchange rates dynamics (JEL classification: E43, F31, G12).

Recent findings on the term structure of equity and bond yields pose serious challenges to existing equilibrium asset pricing models. This paper presents a new equilibrium model to explain the joint historical dynamics of equity and bond yields (and their yield spreads). Equity/bond yields movements are mainly driven by subjective dividend/GDP growth expectation. Yields on short-term dividend claims are more volatile because short-term dividend growth expectation mean-reverts to its less volatile long-run counterpart. Procyclical slope of equity yields are due to counter-cyclical slope of dividend growth expectations. The correlation between equity returns/yields and nominal bond returns/yields switched from positive to negative after the late 1990s, owing to (1) procyclical inflation and (2) stronger correlation between expectations of real GDP growth and of real dividend growth post-2000. Dividend strip returns are predictable and the predictive power decreases with maturity due to predictable forecast errors and revisions. The model is also consistent with the data in generating persistent and volatile price-dividend ratios, and excess return volatility.

This study examines how Donald Trump's re-election on November 6, 2024, influenced US financial markets, focusing on long-term interest rates and inflation expectations. Understanding market responses to political outcomes helps investors manage risk and supports economic forecasting and policy decisions. We use daily data from August 1, 2024 to February 28, 2025 on the 10-Year Treasury Yield (TY10) and the 5-Year Breakeven Inflation Rate (BEI5). Four econometric models are utilized, including an Interrupted Time Series (ITS), Local Projections (LP), Event Study, and Quantile Regression (QR). All models control for key macro-financial factors, including the Economic Policy Uncertainty Index (EPU), the CBOE Volatility Index (VIX), and the US Dollar Index (DXY). Newey-West and bootstrapped standard errors are used to correct for autocorrelation and heteroskedasticity. Results show that TY10 and BEI5 increased gradually after the election. The ITS model showed a trend reversal in which yields and expectations had been rising before the election but began flattening or falling afterward. The LP model found significant increases starting on Day 1, peaking by Day 3, and persisting through Day 7. The event study confirmed a cumulative rise of 8.5 basis points in TY10 and 5 basis points in BEI5. QR revealed stronger effects in lower parts of the distribution. Among controls, DXY had a consistently strong positive effect, while EPU and VIX had more mixed and context-dependent influences. This study adds new insight into how financial markets respond to a major political event using high-frequency data and multiple methods.

slowing building permits and falling home prices). In financial markets, some investors may become more risk-averse, and bond yields may rise, thereby making In economics, a recession is a business cycle contraction that occurs when there is a period of broad decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scal Declining trucking and shipping volumes of goods. The Baltic Dry Index (BDI), a shipping freight-cost index which reflects the demand for shipping capacity versus the supply of dry bulk… Rising corporate debt can foreshadow a bear market, notably when businesses go ahead with taking on more debt, despite having diminishing sales and dwindling earnings. Credit conditions like credit spreads. The spread between corporate bonds and U.S. Treasuries is important. If the spread between corporate and government debt increases, this could signal that private sector lending is becoming strained. The long-term spread: The spread between a shorter-term rate (like the three-month Treasury yield) and 10-year U.S. bond yields. The long-term Treasury yield spread has been particularly effective at predicting recessions many months in advance, achieving an AUC (Area Under the Receiver Operating Characteristic curve) value of 0.89 at 14 months ahead. And it is the best predictor at a horizon of 16 to 20 months ahead, when compared to other leading indicators. The near-term forward spread: This is the difference between the market expectation of the interest rate on a three-month Treasury bill six quarters in the future and the current three-month Treasury bill yield. An inverted yield curve can indicate that a recession may be on the horizon as it has historically often preceded economic downturns with lead times ranging from several months to over a year. Especially the disinversion, a move back into positive territory for the spread between the shorter (e.g. 3-month or 2-year) yield and the longer (e.g. 10-year) Treasury yield, has in the past, been a reliable recession signal as the curve usually disinverts (or un-inverts) nearly before the recession truly appears. Based on recent history, the last four recessions, as of Q2-2024, didn't start until the inverted curve returned to a positive reading (steepens). Further analysis shows that "the average time to recession (...) [is] only 66 days from when the [3-month/10-year] curve disinverts." The S&P 500 and BBB bond spread. The federal budget deficit typically worsens strongly ahead of a recession. Business Expectations:

A monetary policy in which the central bank increases the money supply in the banking system, as by purchasing bonds from banks.: #* #* 2012, The Economist, Jul 14th 2012 issue, [http://www.economist.com/node/21558596 Quantitative easing: QE, or not QE?] #*: In times of severe economic distress, however, rates may fall to zero. Cue QE. When the Bank of Japan (BoJ) pioneered QE in 2001, its goal was to buy enough securities to create a desired quantity of reserves (hence, “quantitative easing”). Its actions, it hoped, would raise asset prices and end deflation.

PAGE EIGHT _ Roger Babson Presents Business Outlook For 1943 Retail Trade Farm Income Labor Included Political Situation Rationing Inflation And Other Problems Discussed Thumbnail Outlook For 1943 1 Total Business Defense production will be up sharply plus 50 nondefense down sharply minus 33 panied by a drastic standardi aatidh of products 2 Employment TH above also applies to employment if we do not include the armed forces 3 Farm Income Will be up 5 in 1943 over 1942 t 4 Dividends And Business Earnings Have passed tliejr peaks and will be lower in in 1943 than in 1942 1 i 5 Labor There willUc jjrac_ k tically no strikes until the end of the War and wages will gradually become stabilized 6 Commodity Prices Will strengthen somewhat especial ly the prices of manufactured goods Commodity price index es will indicate far less than the actual advance 7 Taxes Will be felt severe ly especially by the white eollar group who can expect no pav increases 8 Retail Trade Will be 12 off in physical volume in 1943 compared with 1942 3 Highgrade Bonds Should decline but good Stocks should seH higher 10 Creeping Inflation Will continue throughout 1943 Babson