October 13, 2026

US 10-year Treasury yields have risen by about 100 bps since the beginning of the year. A model developed by Fed economists D’Amico, Kim and Wei decomposes Treasury yields to show what is driving the move. Updated estimates released point to two main factors: 1. The expected path of real short rates has moved higher. The model estimates that the average real short rate expected over the next 10 years has increased. Lower oil prices or weaker growth could ease some of this pressure and help bring longer-term rates down. 2. The term premium has risen. The term premium is the additional yield investors demand to hold a long-dated bond beyond what the expected path of Fed policy would imply. It can therefore capture compensation for longer-term risks, including concerns around fiscal sustainability or Fed credibility. The bottom line is that higher long rates this year reflect both the higher expected policy path from the Fed and investors asking for more compensation to hold duration. Written by Allison Boxer

October 12, 2026

The US and Europe have fundamentally different roles in the AI economy. One is building it, and the other is using it. The US dominates on every supply-side measure: hyperscaler capex approaching $800 billion in 2026, data center capacity three times that of Europe and the dominant share of global AI models and semiconductor value, see the first three charts below. Yet on adoption, several European countries are actually ahead of the US, and many European firms are using AI in their businesses (see the fourth and fifth charts). This suggests Europe is an eager user of infrastructure it did not build and cannot easily replicate. The bottom line is that the US is the dominant AI builder, but both the US and Europe are AI adopters. For more, see our new chart book: The macro implications of the AI investment boom: US and Europe Written by Huw van Steenis

October 11, 2026

The gap between the 90th- and 10th-percentile public core bond managers has narrowed from 1.5% a year in the 2010s to 1.1% since 2020, see the first and second charts below. Dispersion now spikes mainly in crises and quickly falls back. This convergence comes on top of persistent underperformance by public fixed income managers. For example, data from S&P shows that over the past 10 years, the majority of active Treasury fund managers have underperformed their benchmarks, see the third chart below. The bottom line is that with little difference between top and bottom managers in public fixed income, and almost all of them trailing their index, public core fixed income has become essentially a beta allocation for both institutions and households.