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Greece charges as negative rates fade

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Markets seem to be coming to the slow realisation that negative or near negative bond yields are not necessarily the most wonderful investment option in the world - as the realisation that deflation is not an imminent threat percolates across the Euro area.
  • Greece has proposed a surcharge on bank deposit withdrawals, subject to agreement by the ECB. Behavioural economics and the law of loss aversion would appear to kick in here - the loss of x always outweighs the gain of x - which suggests that this may not be a terribly popular policy.
  • Euro service sector sentiment is forecast to be relatively upbeat, although it would be unwise to read too much through to the predictions from the more positive US service sector sentiment numbers. Services are more tradable than before, but global synchronisation is a step too far.
  • US productivity is likely to take a knock back - Q1 GDP was weak but the labour market was strong. It is, after all, hard to be productive when buried up to one's neck in a snowdrift. This implies higher unit labour costs - and though Q1 data will be distorted, the trend is rising (implying some inflation pressures).