September 02, 2026

The term premium measures the extra yield investors demand for holding a long-dated bond beyond what expectations for Fed policy alone would justify, which makes it a key market-based gauge of fiscal sustainability and Fed credibility. Speaking at the last Treasury Market Conference, Treasury Secretary Bessent noted that the US 10-year term premium is basically unchanged. The chart below shows that this is still the case. Specifically: 1) The New York Fed’s measure of the US 10-year term premium has moved sideways over the past 12 months. On this measure, there has been no deterioration over the past year in how the market prices US fiscal sustainability or Fed credibility. 2) The US term premium currently sits below the term premiums of Japan and Germany. This suggests that the market is less worried about the US fiscal situation compared with the fiscal situation in Germany and Japan. The bottom line is that this chart pushes back on the idea that the US fiscal situation is having a uniquely large impact on long-term rates, or that Fed credibility is worse today than 12 months ago. Put differently, the Fed went into 2026 expecting several cuts, and now the FOMC is leaning toward hiking. With this backdrop, it is not surprising that long rates are higher.

September 01, 2026

We have updated our 127-page US housing outlook, available here. There are 10 conclusions: High mortgage rates at 6.7% combined with a median home price of $400,000 are holding down traffic of prospective homebuyers, see the first chart. 75% of US households can only afford a home priced below $300,000, well under the current median sales price, see the second chart. The share of first-time homebuyers is at the lowest level in decades, and the median first-time buyer is now 40 years old, up from 30 in 2008, see the third chart. Nobody is moving. The structural decline in the share of the US population changing address continues, and the share of households planning to move over the next 12 months has fallen to a record low of approximately 7%, see the fourth chart. Household formation has slowed sharply as immigration has declined, removing a key source of underlying housing demand, see the fifth chart. The typical American home is now 42 years old, and we are not building fast enough to replace the aging stock, see the sixth chart. US homes are getting smaller, with the median size of new single-family homes declining over the past decade as builders chase the price points buyers can still reach, see the seventh chart. House price inflation has stalled near 1% overall, but it is turning higher again for the most expensive homes, where buyers are least dependent on mortgage financing, see the eighth chart. Households' equity in real estate totals $35 trillion, an average of roughly $400,000 per owner-occupied home, see the ninth chart. Delinquency rates on multifamily housing have climbed above their post-GFC peak to the highest level since at least 2004, see the tenth chart.

August 31, 2026

The Big Mac index measures currency valuation by comparing the price of an identical burger across countries. By that measure, the Brazilian real and Egyptian pound look deeply undervalued against the dollar, by 20% to 55%, see charts below. But swap the burger for an iPhone 17 Pro with 256GB, and the picture inverts. The same phone costs 90% more in Brazil and 55% more in Egypt than it does in the US. The difference is what goes into each product. A burger is assembled from local labor, local rent and local beef, none of which can be arbitraged across borders, while an iPhone is a genuinely global good built from one supply chain at one dollar cost. The bottom line is that the iPhone index is the better read on currency valuation, because the Big Mac's core weakness is the one Balassa and Samuelson identified 60 years ago. Productivity gains in rich countries lift wages economy-wide, including in the kitchen, so poor countries look cheap by construction rather than because their currencies are genuinely undervalued.