Depite strong income (GDP) growth in 2018 and increases government spending tax revenues were flat, thanks to the huge Trump tax cut (mostly for corporations).  Menzi Chinn highlights a real puzzle: Why are term spreads (10yr -3mo Treasury Bill Spreads) falling as the deficit is rising? ON TOP OF THAT, demand for treasuries in general seems to be falling (although it would be interesting to see the graph disaggregated by 10yr and 3mo terms). Figure 1: 10 year-3 month Treasury spread (blue), structural budget deficit as a share of potential GDP (red). Orange shading denotes Trump administration. Source: Federal Reserve, CBO, Budget and Economic Outlook, and Chinn’s calculations.Figure 2: Foreign and international holdings of US Treasurys (blue) and Federal Reserve holdings (red), both as a share of potential GDP. Source: BEA, CBO, and Chinn’s calculations.