Macroeconomics: The Day Ahead for 18 November

There is a busy schedule of events, but the statistical agenda today is meagre, with the US NAHB Housing Market Index and NY Fed Services survey accompanied by the very ‘stale’ Factory Goods Orders data for August, with little else likely to attract attention. Markets are in any case in a period of introspection, though how much of this is a case of the typical bouts of volatility around Mag 7 earnings (Nvidia reports tomorrow), which are generally a case of the ‘options tail’ wagging the market dog, and how much is concern that a) the Fed will pause rate cuts in December, and b) government debt woes are being taken more seriously, remains to be seen. On that front, the latest BofA survey underlines that investors’ ability to catch a falling knife (i.e. ‘buy the dip’) is rather limited given very low levels of cash, very overweight equity positions and high valuations. It remains to be seen if Gresham’s law comes into effect, and some investors are forced to cut profitable positions to cover losses elsewhere, with looming year end inevitably becoming a consideration. Central bank speakers are very numerous, though in many cases they will be talking about regulation or other non-monetary policy issues, with perhaps more attention given to the meeting between US president Trump and Saudi Crown Prince Mohammed bin Salman, which will see a lot of investment announcements, though probably no progress on US attempts to get Saudi Arabia to establish diplomatic ties with Israel.

In terms of the overnight news, the RBA minutes did, as expected, signal that the pause in rate cuts could prove to be protracted. Meanwhile in Japan, the BoJ’s policy dance with the new Takaichi government continues, with the messaging from Ueda after his meeting with the PM remaining rather ambiguous, and perhaps reflective of a difference of opinion on the way forward between Takaichi and Finance Minister Katayama, the latter expressing ‘alarm’ over JPY volatility, which would imply a greater willingness to countenance a further BoJ rate hike. But the current bout of JPY weakness clearly relates to the government narrative on the supplementary budget, which in a few short days has gone from talk of a JPY 17.0 Trln ($110 Bln) package to JPY 25.0 Trln ($161 Bln), though details of ‘how much’ will be spent on ‘what’ remain scant, and obviously subject not only to negotiations with coalition partner Ishin, but also opposition parties, one or more of which will need to vote for any package, given that the coalition is a minority government.

One final plea to reporters, market analysts and commentators, please stop writing headlines about ‘record high’ 20-yr JGB yields, they may stand at levels not seen since 1999, but are nearly 300 bps BELOW the all-time high, as per the attached chart.

Chart: Copyright 2025 Bloomberg Finance L.P.