UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Fiscal boosts and bonds'
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Nov 12, 2025 President Trump has proposed a $2,000 check for households, but it hinges on congressional approval. Meanwhile, the bond market remains skeptical, focusing more on unreliable labor market signals than on potential fiscal risks. There are expectations for fiscal stimulus next year that could stimulate early growth. Also, German inflation appears stable, staying aligned with the ECB target, while uncertainty looms over the Federal Reserve's plans for rate cuts as several speakers share differing views.
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Markets Doubt Large Direct Fiscal Checks
- Paul Donovan highlights President Trump's suggestion of a $2,000 check would need congressional approval and seems unlikely to pass.
- He notes bond markets are pricing low probability of larger deficits from such fiscal action.
Rebates Would Outweigh Tariff Revenue
- Donovan argues a comprehensive rebate would outweigh tariff revenue and noticeably raise the fiscal deficit.
- He says bond markets are not pricing in that deficit increase and instead focus elsewhere.
Bonds Chase Labour Signals, Not Deficits
- Bond markets are concentrating on weak-quality labour market signals to infer the Fed's priorities.
- Donovan suggests markets hope the Fed will guard against a labour-market collapse rather than focus on inflation.