BIGFI/Finance Seminar with Howard Kung, London Business School

On Friday, October 25, 2024, Howard Kung, London Business School, will be giving a seminar on the paper: Can U.S. Treasury Markets Add and Subtract?

Friday, October 25, 2024 - 11:00 to 12:15

The Department of Finance and BIGFI are proud to announce the upcoming seminar with Howard Kung, London Business School.

Howard Kung will present: Can U.S. Treasury Markets Add and Subtract?

Abstract:
The CBO cost releases of legislative proposals contain valuable news about surpluses priced in by Treasury investors. Using daily event windows, we find that cost releases with large negative cash flows lowered Treasury valuations by more than 20% between 1997-2022, a sample marked by a significant shift in U.S. fiscal policy. The valuation effects are concentrated at longer maturities, with an overall increase of 4% in long-term nominal yields driven by an increase in term premia and inflation expectations and a decrease in convenience yields. In an estimated model where investors use the cost releases to learn about long-run deficits, we find that 57 cents of every dollar in the fiscal expansion is passed through to Treasury valuations, and a 1% surprise increase in the expected debt-to-GDP corresponds to an increase of the 10-year nominal yield by 31 bps and a drop in the convenience yield by 7.5 bps.

Location:
Solbjerg Plads 3
2000 Frederiksberg
Room: SPs03

The page was last edited by: Department of Finance // 10/28/2024