Pieces of Eight: News Bulletins from the Eighth Federal Reserve District

The Rise of Long-Term Bond Yields

Since the 1950s, the long-term Treasury bond yield has roughly mirrored the upward and downward movements in inflation. Recently, however, long-term yields have increased while inflation has decreased. Analysts and forecasters are puzzled. What is causing long-term interest rates to rise?

In the current issue of Annual U.S. Economic Data, St. Louis Fed research director William G. Dewald examines the relationship between long-term interest rates and inflation and concludes that the increase in long-term rates is due to the anticipated increase in inflation by many investors.

For more details on his analysis, please call Debbie Dawe at 314-444-8809 and request a copy of the 1994 issue of Annual U.S. Economic Data.

Why the Trade Deficit with Japan Isn't Shrinking

Despite previous movements in the dollar's real exchange value relative to the yen that should have reduced the U.S. trade deficit with Japan, the deficit continues to grow. In fact, in 1993, the trade deficit reached a record high of $59.3 billion. Why isn't the U.S. trade deficit with Japan shrinking?

According to Fed economist Patricia S. Pollard, one reason is the relative strengths of the U.S. and Japanese economies. In the past two years, the U.S. economy has grown faster than the Japanese economy. As a result, she says, U.S. spending on imports from Japan has increased, while Japanese spending on U.S. exports has decreased. Thus, the effects of exchange rate movements on this bilateral trade deficit have been more than offset by the weakness of the Japanese economy.

"As the Japanese economy recovers from its current recession, however, the U.S. trade deficit with Japan should begin to shrink," adds Pollard.

To request a copy of the May 1994 issue of International Economic Conditions, please call 314-444-8809.

Extra! Extra! Read All About It!

The publication you're reading is just one of several free research publications produced by the Federal Reserve Bank of St. Louis. Here, briefly, is a description of several other research publications that are available.

• Review—A bimonthly economics journal containing articles about national and international economic issues.
• Monetary Trends—A monthly publication containing charts and tables on U.S. monetary and reserve aggregates, savings and time deposits, and commercial bank loans.
• National Economic Trends—A monthly publication containing charts and tables on U.S. output and income, employment, inflation and selected budget measures.
• International Economic Conditions—A quarterly publication (plus an annual edition) containing data on U.S. transactions with the rest of the world, as well as data on the quantity of money, inflation, unemployment, real GDP, merchandise trade, interest rates and exchange rates for leading countries.
• Annual U.S. Economic Data—An annual publication containing monetary and business data, including closely watched production, employment and price series.

All publications also include a brief analysis of a current issue. Single subscriptions to these publications are available free of charge. To subscribe to a publication or to find out more information, call Debbie Dawe at 314-444-8809 or Cindy Davis at 314-444-8808.

Percentage Rate of Business Closings from October 1991 to September 1992