UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Managing debt'
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Dec 2, 2025 Japan's recent bond auction reveals robust domestic demand amidst international concerns over debt. While foreign investors are anxious, Japanese investors remain calm due to the country's wealth and strong local bond ownership. Historically, despite a substantial rise in debt-to-GDP, Japan has navigated funding successfully. Meanwhile, market speculation hints at a December rate cut, while inflation trends show a decline in the UK and stable rates in the euro area, bolstered by favorable trade policies.
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Global Worry Vs Domestic Calm
- International investors have been worrying about Japan's rising debt while domestic investors remain calm.
- Paul Donovan highlights Japan's wealth and domestic bond ownership as reasons funding problems haven't emerged.
1993 Flashback To Debt Fears
- Paul Donovan recalls being a Japanese economist in 1993 amid similar alarm about rising debt ratios.
- He notes debt-to-GDP has more than trebled since and still no funding crisis emerged.
Powell's Rare Exception
- Fed Chair Powell may speak despite the usual blackout if markets stray from Fed expectations.
- Donovan argues Powell likely won't say anything market-moving about December policy today.