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The laws of supply and demand

| Posted by: Paul Donovan | Tags: Paul Donovan

US President Trump spoke to Congress last night. Congress will not do anything about it.

Financial markets are getting used to the terrifying idea of 10-year US bond yields over 2.7%. This is below the economic concept of fair value for a bond, and it is likely to remain below the economic concept of fair value for a bond. It is very unlikely to worry the Fed, which should signal today that they are on course to raise rates at their March meeting.

The Euro area releases consumer price inflation. A small dip on base effects is likely. No sensible central banker would pay attention to that. A sensible central banker would look at the broader economic trends and conclude that ultra-accommodative policies are not needed. The question is whether the ECB is headed by a sensible central banker.

Facebook has announced that they are banning cryptocurrency adverts. Late-stage bubbles rely on sucking in money from large numbers of ill-informed people to benefit a small number of bubble sellers. Depriving a late-stage bubble of publicity may impact demand. Cryptocurrency supply can only ever go up. Supply up, demand down has obvious implications for value.