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Paul Donovan

@pdonovan-econ.bsky.social
2.1K followers 808 following 1K posts

Economist. Part time farmer. Amateur boxer. Occasional author. Egotist. Advocate of economics without jargon. Inflation, environmental economics, the economics of prejudice, structural change. ubs.com/pauldonovan

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Paul Donovan @pdonovan-econ.bsky.social · 09/10/2026
Will no one think of the bondholders? Economics is about demand as much as supply. Bond investors are finally exiting a grim period of unfair yields. www.ubs.com/global/en/we... #EconSky
ubs.com
Will no one think of the bondholders?
Rising bond yield are causing angst in government circles (and ill-disguised glee in financial media circles, as a new sensation). As with some other areas of economics, the current narrative tends to...
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Paul Donovan @pdonovan-econ.bsky.social · 09/10/2026
Worrying about the cost of war Posts from US President Trump could be taken as suggest a concern about the domestic political costs of war, rekindling market optimism. www.ubs.com/global/en/we... #EconSky
ubs.com
Worrying about the cost of war
US President Trump’s social media account declared the US would not attack Iran before the midterm elections. Other actors in the war may launch attacks. The post does reveal the concern about the pol...
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Paul Donovan @pdonovan-econ.bsky.social · 08/10/2026
The policy-induced recession risk Oil prices disproportionately impact other markets via fears central banks will use policy to put the non-oil economy into recession. www.ubs.com/global/en/we... #EconSky
ubs.com
The policy-induced recession risk
Crude oil prices and diesel prices are up (there seems to be uncertainty about whether last Friday’s pledge to release diesel reserves is actually just confirming previously announced reserve releases...
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Paul Donovan @pdonovan-econ.bsky.social · 07/10/2026
Managing expectations The minutes of the last US monetary policy meeting are due, and may show more nuance than the unanimity of the decision implied. www.ubs.com/global/en/we... #EconSky
ubs.com
Managing expectations
The political costs of the Gulf war are evident—US President Trump suggested removing the federal tax on gasoline. Gasoline prices (unlike diesel) feed directly into US consumer price calculations. Ho...
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Paul Donovan @pdonovan-econ.bsky.social · 05/10/2026
Revisions, resilience, and affordability The US employment report message not to trust real time data. US consumer should remain resilient, despite the affordability crisis. www.ubs.com/global/en/we... #EconSky
ubs.com
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Paul Donovan @pdonovan-econ.bsky.social · 02/10/2026
What are we missing Increasingly imprecise economic data means policymakers may waste time pursuing non-existent problems, or (worse) making policy errors. www.ubs.com/global/en/we... #EconSky
ubs.com
What are we missing?
After years of angst about low UK productivity numbers, the problem has been solved—because it never existed. The numbers were revised higher. US savings rates were approaching worryingly low levels—u...
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Paul Donovan @pdonovan-econ.bsky.social · 02/10/2026
The labor market anomaly US jobs reports show an OK labor market; but wage growth struggles to match price inflation, and the wage share of the economy is falling. www.ubs.com/global/en/we... #EconSky
ubs.com
The labor market anomaly
The US employment report has a wide range of estimates around the payrolls data. This is not surprising—labor market data precision is challenged by low response rates and structural changes in the wa...
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Paul Donovan @pdonovan-econ.bsky.social · 01/10/2026
Saving the US consumer US consumers continue the trend of cutting savings rates to pay for tariffs and oil. Revisions suggest they have more room to cut and spend. www.ubs.com/global/en/we... #EconSky
ubs.com
Saving the US consumer
The important point from yesterday’s US data was not the larger-than-expected downward pressures on reported inflation—these are technical changes that US consumers do not experience in their daily st...
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Paul Donovan @pdonovan-econ.bsky.social · 30/09/2026
The power of saving more, or less UK data is a reminder that if oil prices come down, the consequence may be rebuilding savings rates rather than boosting consumption. www.ubs.com/global/en/we... #EconSky
ubs.com
The power of saving more, or less
UK second quarter GDP was revised stronger, as new methods reveal how much new economic activity has been missed from the data. Rising real disposable incomes encouraged a rise in the UK household sav...
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Paul Donovan @pdonovan-econ.bsky.social · 29/09/2026
Bonding oil prices to yields The more central banks talk about oil price inflation, the more markets will expect restrictive policy responses to higher oil. www.ubs.com/global/en/we... #EconSky
ubs.com
Bonding oil prices to yields
Bond yields and oil prices continue their close relationship. Central banks are supposed to look through an oil price shock as being beyond their control. However, if central banks seemingly care abou...
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Paul Donovan @pdonovan-econ.bsky.social · 28/09/2026
Camels through the eyes of fishhooks Sunday’s announcement of lower tariffs between the US and China is unlikely to move markets. Oil price moves are moving markets. www.ubs.com/global/en/we... #EconSky
ubs.com
Camels through the eyes of fishhooks
China and the US agreed to lower tariffs on USD 30bn of each other’s products. China’s consumers will pay lower taxes when buying camels from the US. US anglers face lower taxes when buying fishhooks ...
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Paul Donovan @pdonovan-econ.bsky.social · 25/09/2026
The direct effect still holds. The effective mortgage rate, which obviously includes the consequences of fewer financed purchases and the large stock of mortgages that refinanced immediately post pandemic, was 4.3% in Q2 (Fed data) the highest since late 2011.
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Paul Donovan @pdonovan-econ.bsky.social · 25/09/2026
The beef with affordability Affordability is not an objectively measured concept, but the US economic environment keeps the affordability crisis in focus. www.ubs.com/global/en/we... #EconSky
ubs.com
The beef with affordability
An affordability crisis is driven by three key factors: perceptions of consumer price inflation (not reality, as opinions are skewed by high-frequency purchases); whether income growth exceeds that pe...
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Paul Donovan @pdonovan-econ.bsky.social · 25/09/2026
House problems Rising US mortgage rates represent an affordability problem that is hidden from the already mediocre US real income growth www.ubs.com/global/en/we... #EconSky
ubs.com
House problems
US Treasury Secretary “House” Bessent faces something of a housing problem. Despite Bessent’s efforts, US mortgage rates rose above 7% yesterday. The exact level is not important (except to the media,...
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Paul Donovan @pdonovan-econ.bsky.social · 24/09/2026
In bondage? Bond yield moves seem alarming to younger traders, but more modest to those who remember the pre-financial crisis world. www.ubs.com/global/en/we... #EconSky
ubs.com
In bondage?
US 10-year Treasury bond yields moved sharply above 5%, and the USDJPY exchange rate is back above 158. US Treasury Secretary “House” Bessent seems to be demonstrating the house does not always win. F...
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Paul Donovan @pdonovan-econ.bsky.social · 23/09/2026
The surge in manufacturing SENTIMENT above a 50 reading this year so far has managed to produce a 0.9% yoy rate of growth in manufacturing output REALITY. US manufacturing output fell in the latest month, even though sentiment rose as a rapid pace.
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Paul Donovan @pdonovan-econ.bsky.social · 23/09/2026
Spinning away from war? Could reaffirming the Obama era deal with Iran be spun in such a way as to end the war in the Gulf? www.ubs.com/global/en/we... #EconSky
ubs.com
Spinning away from war?
Markets have not fully regained their earlier optimism bias, but are a little more cheerful. Yesterday, US President Trump signed an agreement essentially reaffirming the status quo with Greenland and...
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Paul Donovan @pdonovan-econ.bsky.social · 22/09/2026
Independent thinking Gulf states are not optimistic about Iranian peace talks with the US, and seem to be considering a future with less US support. www.ubs.com/global/en/we... #EconSky
ubs.com
Independent thinking
Gulf states, meeting on the fringes of the United Nations gathering, have suggested peace talks between Iran and the US are not progressing. Markets are not, perhaps, too surprised to learn this. The ...
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Paul Donovan @pdonovan-econ.bsky.social · 21/09/2026
Affordability, again Record US diesel prices shape affordability concerns by raising inflation perceptions. www.ubs.com/global/en/we... #EconSky
ubs.com
Affordability, again
US average diesel prices broke above USD 6.50 per US gallon for the first time ever. Since January 2025, overall price levels (measured by the consumer price index) are up 4.8%, with motor fuel prices...
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Paul Donovan @pdonovan-econ.bsky.social · 18/09/2026
www.bloomberg.com/news/videos/...
bloomberg.com
Watch 'The House Has Lost:' Donovan on BOJ Decision, Bessent - Bloomberg
Paul Donovan of UBS Global Wealth Management joins Bloomberg's Guy Johnson on "Bloomberg Brief" to discuss his reaction to the BOJ raising its key interest rate and his thoughts on what's next for the...
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Paul Donovan @pdonovan-econ.bsky.social · 18/09/2026
What happens if Iran is setting global rates? If central banks are no longer looking past oil as a “one-off” event, then there is a risk they will seek to deflate the non-oil economy. www.ubs.com/global/en/we... #EconSky
ubs.com
What happens if Iran is setting global rates?
Recent central bank commentary has cited oil prices as a reason to consider tightening policy. Traditional oil price shocks are something central banks look past as “one-off” price events. Unfortunate...
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Paul Donovan @pdonovan-econ.bsky.social · 18/09/2026
Policy peculiarity, and a productivity "miracle" The Bank of Japan raised rates. The Bank of England did not, but changed bond sales. A UK press statement unleashed a productivity “miracle”. www.ubs.com/global/en/we... #EconSky
ubs.com
Policy peculiarities, and a productivity “miracle”
The Bank of Japan raised rates, as expected. The decision was not unanimous, causing a modest market reaction. The yen has weakened—yelling “house” like a grandmother in a bingo parlor does not offset...
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Paul Donovan @pdonovan-econ.bsky.social · 17/09/2026
The lesser of two evils The US rate increase will be followed by a second to prove that this rate increase was not a mistake (even if it was). www.ubs.com/global/en/we... #EconSky
ubs.com
Insights from Paul Donovan
Economics is something everyone can and should understand.
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Reposted by Paul Donovan
Tony Tassell @tonytassell.bsky.social · 17/09/2026
Paul Donovan of UBS is such a elegant writer on economics and markets - here he is on how the social media echo chamber and partisanship is skewing inflation expectations as.ft.com/r/4f2db285-3...
as.ft.com
The social-media echo chamber is skewing inflation expectations
Survey evidence from consumers and companies has become noise for policymakers
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Reposted by Paul Donovan
Financial Times @financialtimes.com · 17/09/2026
Do inflation expectations matter in a social-media echo chamber? ft.trib.al/zZDDmzg | opinion
ft.trib.al
Do inflation expectations matter in a social-media echo chamber?
Consumers and companies lack the ability or will to act — it is bond investors that policymakers should worry about
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Paul Donovan @pdonovan-econ.bsky.social · 16/09/2026
A series of unfortunate events Post-pandemic inflation was generally one-off, and beyond central banks' control. Should they seek to control the prices they can influence? www.ubs.com/global/en/we... #EconSky
ubs.com
A series of unfortunate events
After the pandemic, the world’s central banks were subject to a series of unfortunate events: supply chain disruption, a war in Ukraine, profit-led inflation, tariffs, and a war in the Gulf. These one...
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Paul Donovan @pdonovan-econ.bsky.social · 15/09/2026
Magic numbers The US 10 year Treasury yield at 5% is a political and media event more than an economic event www.ubs.com/global/en/we... #EconSky
ubs.com
Magic numbers
China's latest economic data showed a lackluster domestic economy. Retail sales slowed, and were weaker than expected. Domestic investment plunged more than expected. Industrial production is being su...
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Paul Donovan @pdonovan-econ.bsky.social · 14/09/2026
The “sock puppet” premium If Fed Chair Warsh were to surprise on rates, it could reawaken credibility concerns www.ubs.com/global/en/we... #EconSky
ubs.com
The "sock puppet" premium
Oil prices are up again on oil pipeline attacks and delayed talks. Some shifts in oil demand are enduring. China's scaled back demand, and the use of global oil reserves are not infinite, eroding res...
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Paul Donovan @pdonovan-econ.bsky.social · 14/09/2026
podcasts.apple.com/gb/podcast/u...
podcasts.apple.com
Across the Pond: Europe’s political pendulum swings wider
Podcast Episode · UBS On-Air: Market Moves · 11 September · 26min
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Paul Donovan @pdonovan-econ.bsky.social · 11/09/2026
Reserved reserves International central banks were captive investors in US Treasuries. They may not have escaped captivity, but they are less influential. www.ubs.com/global/en/we... #EconSky
ubs.com
Reserved reserves
News that the Dutch central bank has headed for the exit of the New York Federal Reserve with as much gold as it could carry has revived questions about the US dollar’s reserve role. Traditionally, th...
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Paul Donovan @pdonovan-econ.bsky.social · 11/09/2026
Red sky in the morning, bond market warning
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Paul Donovan @pdonovan-econ.bsky.social · 10/09/2026
Policy and promises# The ECB is expected to commit another policy error. US President Trump is pledging to spend more government money. www.ubs.com/global/en/we... #EconSky
ubs.com
Policy and promises
The ECB is almost certain to repeat its earlier policy rate error and unnecessarily raise interest rates. There is unlikely to be any inflation or economic growth impact, but a further rate increase e...
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Paul Donovan @pdonovan-econ.bsky.social · 09/09/2026
Market and non-market inflation forces China’s inflation rose as global market prices were allowed to trickle through. US inflation risks rest on decisions outside the marketplace. www.ubs.com/global/en/we... #EconSky
ubs.com
Market and non-market inflation forces
China’s August consumer and producer price inflation was slightly higher. The suggestion is not that better demand is driving up prices, but that global inflation forces are being allowed to trickle i...
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Paul Donovan @pdonovan-econ.bsky.social · 08/09/2026
Trading carefully China’s trade data strongly suggests that US importers are being creative in finding ways to minimize their tariff liabilities. www.ubs.com/global/en/we... #EconSky
ubs.com
Trading carefully
China’s July trade data showed ongoing growth in exports—some of this reflects re-exporting. The gap between what China says it is selling to the US and what the US admits to buying from China has rea...
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Paul Donovan @pdonovan-econ.bsky.social · 07/09/2026
Monetary policy and forever wars Crude oil prices are rising again. If oil prices keep rising, should central banks weaken the non-oil economy to offset the inflation? www.ubs.com/global/en/we... #EconSky
ubs.com
Monetary policy and forever wars
Markets’ responses to last Friday’s US employment report rebuke US monetary policy communication. The report showed strong payrolls growth, but unemployment rates drifted very slowly higher. The labor...
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Paul Donovan @pdonovan-econ.bsky.social · 04/09/2026
Are workers hitting rock bottom? US workers are taking home a smaller share of the economy than ever before, but the story is complicated. www.ubs.com/global/en/we... #EconSky
ubs.com
Are workers hitting rock bottom?
Recent revisions to US data put the labor share of GDP at the lowest level since records began (in 1947). The declining trend is also seen elsewhere. This shift is taking place amid ongoing structural...
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Paul Donovan @pdonovan-econ.bsky.social · 04/09/2026
Talking calmly Recent comments by respected members of the Federal Reserve have introduced a calming tone to financial markets. www.ubs.com/global/en/we... #EconSky
ubs.com
Talking calmly
In the unnecessarily uncertain world of US monetary policy, we heard from Federal Reserve Governor Waller. Waller signaled a desire for unchanged policy, as disinflation forces seem to continue. If di...
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Paul Donovan @pdonovan-econ.bsky.social · 03/09/2026
res.org.uk/become-a-res...
res.org.uk
Become a Fellow - Royal Economic Society
Become a RES member today. Find out what the RES membership can offer you and all the incredible benefits for your economic career.
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Paul Donovan @pdonovan-econ.bsky.social · 03/09/2026
res.org.uk/become-a-res...
res.org.uk
Become a Fellow - Royal Economic Society
Become a RES member today. Find out what the RES membership can offer you and all the incredible benefits for your economic career.
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Paul Donovan @pdonovan-econ.bsky.social · 03/09/2026
Fun with foreign exchange The yen has become excited. The Dutch central bank has taken some of its gold out of the US. www.ubs.com/global/en/we... #EconSky
ubs.com
Fun with foreign exchange
The yen has been gyrating amidst speculation about intervention in the markets and the possibility of more aggressive action by the Bank of Japan. A Japanese market holiday looms. Intervention only c...
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Paul Donovan @pdonovan-econ.bsky.social · 02/09/2026
Any bond traders over 40? Bond yields are at pre-global financial crisis levels. The question is, do any of today’s bond traders remember that time? www.ubs.com/global/en/we... #EconSky
ubs.com
Any bond traders over 40?
Crude oil prices continue to move higher amid ongoing fighting in the Gulf. US gasoline prices have not moved much higher, because they did not move much lower when crude oil prices fell. US President...
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Paul Donovan @pdonovan-econ.bsky.social · 01/09/2026
The AI boom unabated South Korea’s semiconductor exports grew at a very high rate- a reminder that other countries’ AI investments leak out of their economies www.ubs.com/global/en/we... #EconSky
ubs.com
The AI boom unabated
Low level fighting in the Gulf war is keeping oil prices at a higher level. The United Arab Emirates (which was attacked by Iranian drones yesterday) suggested that this situation cannot be sustained....
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Paul Donovan @pdonovan-econ.bsky.social · 01/09/2026
My laptop is not working and I am having to do the research and text for this morning’s podcast on my phone. On the other hand my hotel room has a coffee machine and this view.
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Paul Donovan @pdonovan-econ.bsky.social · 31/08/2026
More hawkish, less depth Federal Reserve Chair Warsh focused on prices with a hawkish spin, but did not delve too deeply into underlying causes. www.ubs.com/global/en/we... #EconSky
ubs.com
More hawkish, less depth
The US and Iran have been trading missile exchanges in the Gulf, pushing oil back over USD 90 per barrel. US President Trump posted a AI-generated video of Kharg Island being destroyed, but there appe...
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Paul Donovan @pdonovan-econ.bsky.social · 30/08/2026
I do hope the data used excludes the sharp increase in the export share of non-monetary gold exports, which are of course dollar denominated
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Paul Donovan @pdonovan-econ.bsky.social · 28/08/2026
Marshmallows and monetary policy The Jackson Hole central bank summer camp gets underway, with investors hoping that unnecessary policy uncertainty will be reduced. www.ubs.com/global/en/we... #EconSky
ubs.com
Marshmallows and monetary policy
Amidst the toasting of marshmallows at the Jackson Hole summer camp for economists, there are some hopes Federal Reserve Chair Warsh will offer a sensible structure for thinking about US monetary poli...
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Paul Donovan @pdonovan-econ.bsky.social · 27/08/2026
Toll time Iranian reports suggest a deal with Oman over charging tolls on shipping passing through the Strait of Hormuz. www.ubs.com/global/en/we... #EconSky
ubs.com
Toll time
The Iranian Revolutionary Guard reported that Iran and Oman have agreed to share revenues from tolls on shipping passing through the Strait of Hormuz—once the strait reopens. The announcement stresses...
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Paul Donovan @pdonovan-econ.bsky.social · 25/08/2026
D-day or Light Brigade? US Treasury Secretary Bessent's threats against Iran are challenged by the potential consequences of attempting to sanction China. www.ubs.com/global/en/we... #EconSky
ubs.com
D-day or Light Brigade?
The US affordability crisis stays in the headlines, with US President Trump suggesting a doubling of tariffs paid by US importers of Canadian cars. However, these tariffs would not take effect until 1...
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Paul Donovan @pdonovan-econ.bsky.social · 24/08/2026
Canada, Iran, and US affordability The weekend’s news suggests the US affordability crisis will grow in prominence - as much about perception as reality www.ubs.com/global/en/we... #EconSky
ubs.com
Canada, Iran, and US affordability
The collapse of trade talks between Canada and the US resulted in US importers being charged tariffs on a further USD 20bn of imports. Import prices (where the tariff is levied) typically represent ab...
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Paul Donovan @pdonovan-econ.bsky.social · 21/08/2026
Four billion dollars The US treasury secretary is clearly keen to see lower bond yields. That would probably require different policy perceptions. www.ubs.com/global/en/we... #EconSky
ubs.com
Four billion dollars
US Treasury Secretary Bessent declared the proposed Treasury buybacks could be four billion dollars. Bond investors seem to feel that four billion dollars is not terribly impressive. Yields rose—thoug...
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