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Interest Rate & Market Commentary for Week Ending  14th November 2025

Weekly Overview

Persistent uncertainty over AI prospects and the interest rate outlook buffeted U.S. stocks as the market rallied on Monday and then sold off on Thursday. The S&P 500 and Dow finished fractionally higher for the week, while the NASDAQ ended slightly lower.   

Bond market traders dialed back their expectations of an interest rate cut at the U.S. Federal Reserve meeting scheduled to conclude on December 10. Friday afternoon’s prices in rate futures markets implied a nearly 46% probability that the Fed would cut by a quarter point, according to CME FedWatch. Just a week earlier, traders had been pricing in a nearly 70% likelihood of a December cut. 

The midweek conclusion of the 43-day U.S. government shutdown is expected to eventually clear a backlog of delayed economic data, but it remains uncertain when many key reports will be issued, how complete they’ll be, and whether some releases may be cancelled. Under a revised schedule, the September jobs report is set to be released on Thursday, November 20; other delayed reports hadn’t been scheduled as of Friday. 

The U.S. stock market appeared to take the 43-day government shutdown in stride. The S&P 500’s closing level on Wednesday—the last day of the shutdown—was 2.4% higher than on September 30, the day before the shutdown started. Government bonds also largely held steady, with the 10-year yield at 4.07% on Wednesday versus 4.15% pre-shutdown.  

The price of the most widely traded cryptocurrency extended its recent decline, falling more than 20% below its recently achieved record high. Bitcoin was trading around $95,000 on Friday afternoon, down from the record of about $125,000 reached less than six weeks earlier. 

With earnings season nearly complete as of Friday, overall results remained well above analysts’ expectations relative to forecasts prior to the release of third-quarter numbers. S&P 500 companies’ earnings were expected to rise by an average of 13.1% versus a forecast for about 8.0% growth entering earnings season, according to FactSet. 

Diminished prospects for an interest rate cut by the Fed at its December meeting weighed on government bond prices, sending the yield of the 10-year U.S. Treasury higher. The yield finished on Friday at 4.15%, up from about 4.09% at the close of the previous week. Yields of 2- and 30-year Treasuries were also higher for the week.  

A gauge that tracks investors’ short-term expectations of U.S. stock market volatility had a bumpy ride on Friday. The CBOE Volatility Index climbed as high as 23.0 in morning trading before slipping below 20.0 at midday. The VIX closed at 19.8, up around 4% for the week.   

Figure 1: World –: World – Major Stock Indices 7 Day Return

 

Chart of the week: Is This the New Dot-Com Bubble? Semiconductors, Nasdaq, and the AI Productivity Cycle

Global tech markets question whether today’s surge reflects an AI bubble, but the evidence suggests the cycle is still early. Unlike the 1990s internet boom, when semiconductor sales jumped 250%; today’s growth is only about 50%, as AI infrastructure remains concentrated in hyperscale data centres and high costs limit broader adoption. Rapid declines in inference costs, up to 900x annually, are now removing this bottleneck. As costs fall, AI deployments will expand across enterprises, consumers and national “Sovereign AI” programs. Agent AI, Edge AI and geopolitical investment will fuel a much larger second wave, making today’s rally the beginning, not the peak, of the cycle. 

Exhibit 2: Is This the New Dot-Com Bubble? 

 

Market Summary Table

Name	Week Close	Week Change	Week High	Week Low
Cash Rate%	3.60%
3m BBSW %	3.64	0.00	3.63	3.63
Aust 3y Bond %*	3.76	0.11	3.81	3.65
Aust 10y Bond %*	4.44	0.07	4.43	4.36
Aust 30y Bond %*	5.03	0.04	5.03	4.99
US 2y Bond %	3.59	0.02	3.59	3.56
US 10y Bond %	4.13	0.03	4.13	4.07
US 30y Bond %	4.73	0.03	4.73	4.66
$1AUD/US¢	65.27	0.46	65.77	64.89

Global Themes Shaping Markets

1. Risk Hedging 

Portfolios that incorporate constant protection against systemic risk rather than relying on reactive stop-loss selling achieve better long-term resilience and avoid forced liquidation at market lows. Risk hedging should be a strategic, ongoing component of portfolio construction, not a response triggered only when volatility spikes and hedging costs rise. 

 The dangers of market timing are clear: investors who de-risked on false recession calls are now underperforming while underweight managers are now tempted to chase all-time highs, compounding performance risks. Despite strong growth, resilient earnings, and robust consumer demand underpinning a “Goldilocks” macro backdrop, structural fragilities persist beneath the surface. The U.S. fiscal deficit, approaching $2 trillion annually has made liquidity provision a systemic requirement rather than a by-product of growth. With central banks selling Treasuries and buying gold, and private savings declining, the main marginal buyers of U.S. debt are highly leveraged hedge funds exploiting small arbitrage spreads through the repo market. This dependency on short-term funding represents the market’s hidden vulnerability. 

 If repo liquidity tightens or overnight rates rise sharply, these leveraged players could be forced to unwind Treasury exposures, triggering a wider funding shock with global implications. As 2022 showed, bonds and equities can decline simultaneously when inflation shocks liquidity, rendering the traditional 60/40 portfolio inadequate to protect capital. True diversification requires exposures that perform differently during liquidity contractions. 

 Multiple liquidity indicators reached critical thresholds in October, compelling the Fed’s QT announcement. The SOFR-IORB spread turned positive for the first time this cycle, signalling elevated short-term funding demand, while overnight reverse repo (ON RRP) facilities drained to just $14.1 billion, eliminating the primary liquidity buffer, as the Treasury General Account (TGA) climbed to $964.8 billion during the  

Government shutdown, further constraining reserve availability. 

Exhibit 3: Funding Stress in Repo Market & TGA Balance 

Thus, investors may consider convexity protection, systemic risk hedges that rise in value during stressed periods, paired with equity risk assets such as the S&P/ASX 200 or MSCI World. When implemented during calm markets, these strategies act as affordable “insurance,” enabling investors to stay fully invested yet protected. Crucially, such hedges can provide liquidity during downturns and be monetised to buy distressed assets at attractive valuations. 

In a financial system increasingly reliant on leverage, liquidity, and confidence, resilience is not optional. The most robust portfolios combine growth participation with structural protection, capturing upside while remaining prepared for inevitable reversals. 

1. Investors Turning Cautious

Global markets lost momentum as a brief tech-led rebound faded, with investors turning cautious ahead of a surge of delayed U.S. economic data and rising doubts about the Federal Reserve’s ability to deliver a December rate cut. Stocks whipsawed throughout the session, with the S&P 500 ending flat after erasing a 1.4% loss, while Treasury yields climbed as traders scaled back easing expectations. The relief from the end of the U.S. government shutdown has quickly given way to volatility, driven by hawkish Fed commentary and the unwinding of crowded AI and momentum trades. 

Tech stocks remained the focal point of market stress. The sector’s recent losses reflect what analysts call a “tech reckoning”, not a collapse but a painful reset as investors rotate into healthcare and consumer staples, sectors that appear to be bottoming. Nvidia rose ahead of its earnings, but options markets are pricing in a 6%+ swing, the largest implied move in a year. Broader weakness persisted across mega-cap names. Analysts warn volatility in AI leaders will continue until the market sees clearer inflation and employment data. 

Despite the turbulence, investors remain broadly constructive on AI long term, though they acknowledge valuations got stretched. Dip-buying attempts have struggled as uncertainty mounts. Strategists from Morgan Stanley and Piper Sandler flagged deteriorating market breadth and a growing defensive tone, though the S&P 500 holding above its 50-day moving average suggests any correction may remain limited unless key data disappoints.

Fed officials intensified their messaging this week, openly questioning the need for a December cut. Markets now assign less than a 50% probability, down sharply from near-certainty before the October meeting. Commentators warn that deep divisions within the FOMC could evolve into a governance challenge for Chair Powell, especially with limited data available until government agencies catch up on releases. A “hawkish cut” remains possible but increasingly unlikely unless upcoming inflation and payroll numbers soften meaningfully. 

In corporate news, Google announced US$40 billion in new Texas data-centre investments, Oracle’s credit protection costs surged, Walmart CEO Doug McMillon announced his retirement, Applied Materials forecast another sales dip, and Merck agreed to buy Cidara Therapeutics. Additional headlines spanned aviation, luxury goods, insurance, and infrastructure, rounding out a volatile week dominated by Fed anxiety and tech-sector rotation. 

III. Powell’s Decision: AI, Labor Market Resilience & Fed Policy Space 

The interaction between AI adoption, employment trends, and labour market balance shapes the Federal Reserve’s policy decisions heading into late 2025. Despite fears that generative AI could rapidly displace workers, the data in October show a labour market that is surprisingly stable, albeit softening gradually.  

Multiple private-sector datasets—ADP, Challenger layoffs, and Revelio Labs illustrate a labour market characterised by the “three lows”: low hiring, low layoffs and low participation. This combination prevents major imbalances and allows employment to remain within a stabilising range despite headline volatility. 

ADP employment rebounded to +42k in October, ending two months of contraction and beating expectations. Challenger layoffs spiked to 153k, but remain below pandemic-era peaks and have not translated into widespread deterioration. Services PMI rose back into expansion territory at 52.4, reinforcing a picture of modest, stable labour demand. Much of the drag on employment growth stems from weak labour supply, immigration remains lower than pre-pandemic and participation is slipping from mid-year highs. 

Within this environment, AI’s impact is more selective than catastrophic. The evidence shows that GenAI adoption depresses junior level hiring much more than senior or experienced hiring. A 2025 academic study shows junior headcount at AI-adopting firms falling 9% relative to non-adopters over six quarters from early 2023, but separations were not meaningfully higher, indicating forward-looking hiring freezes, not mass automation. Mid-tier graduates suffer the most, creating a U-shaped effect across educational tiers. Older workers are mostly unaffected. These results imply that firms are overestimating the near-term automation potential and adjusting hiring cautiously ahead of realised efficiency gains. 

For the Fed, the critical implication is that balanced employment growth, the level required to keep unemployment stable, has fallen dramatically to only 32k–82k per month, well below pre-pandemic norms. Because job gains in 2025 remain within this band, the Fed sees no immediate inflationary or unemployment pressure from AI adoption. Moreover, macro modelling shows that baseline AI investment raises GDP growth and inflation only slightly, around 0.1 percentage points over five years, far below the ambitious scenarios often cited in bullish narratives. 

This gives Chair Powell meaningful “cutting room.” If AI ultimately complements labour more than it substitutes for it, the natural rate of unemployment could even fall, which would support further rate cuts. With GenAI adoption still in its early, exploratory phase and hiring declines driven more by anticipatory caution than realised displacement, overly aggressive productivity assumptions appear unlikely to materialise in the medium term. Overall, the Fed faces a softening but resilient labour market in which AI acts more as a moderating force on hiring than a disruptive inflationary or unemployment shock—helping reinforce a gradual, data-dependent easing path into 2026. 

1. US Liquidity: Shutdown-Driven Funding Stress & Implications for Markets

The fourth theme addresses how the US government shutdown triggered a severe liquidity crunch across funding markets and how its resolution, combined with the end of quantitative tightening (QT), is set to inject as much as US$1 trillion back into the financial system, potentially fuelling a powerful year-end rally. 

In late October and early November, the spread between SOFR and the Interest on Reserve Balances (IORB) surged to 32 basis points, the largest since the March 2020 financial crisis. SOFR jumped to 4.22% even after the Fed cut rates, signalling acute cash scarcity. The cause was a rapid ballooning of the Treasury General Account (TGA), which rose by about US$200 billion in three weeks as the shutdown halted government spending but allowed tax inflows to continue. This effectively vacuumed liquidity out of bank reserves and the repo market. Including the post–debt-ceiling rebuild earlier in the year, nearly US$700 billion had already been absorbed, creating a systemic strain. 

Compounding the issue, the month-end regulatory scramble forced banks and money-market funds to hoard cash for balance-sheet reporting. This seasonal pattern, usually good for a 10–20 bps SOFR spike, became severe under the backdrop of the TGA surge and heavy Treasury bill issuance. More than US$500 billion in short-term supply hit the market as the government borrowed to cover deficits. Abundant Treasury collateral paradoxically worsened funding stress, because regulated institutions locked these T-bills onto balance sheets, reducing collateral available for repo. The Standing Repo Facility registered a record US$50.4 billion draw as institutions sought emergency liquidity. 

The directional market effects were immediate. The US Dollar Index (DXY) strengthened toward 100 as higher funding costs acted as a de facto tightening. Rate cut expectations for December were slashed from above 90% to near 65%, and Treasury yields edged higher. Safe-haven and yield-seeking flows into USD assets intensified the dollar’s strength. 

However, markets now anticipate a dramatic reversal. A bipartisan Senate bill passed a key hurdle on November 9, signalling the shutdown’s end. Once spending resumes, the TGA is expected to fall from roughly US$925 billion toward a normal range around US$750–800 billion, releasing US$100–200 billion per tranche directly into reserves and funding markets. Treasury will also normalise issuance, easing collateral stress. Crucially, the Federal Reserve will end QT in December 2025, halting the decline in bank reserves and stabilising the system after a US$1 trillion reserve depletion since 2022. 

Together, shutdown resolution plus QT’s end could release around US$1 trillion into financial markets, reversing pessimistic trading logic and potentially driving an “epic” year-end liquidity rally. Equities have already responded, with S&P 500 futures briefly breaking 6,800 in anticipation. Funding markets should normalise, DXY should ease, and the broader system’s sensitivity to shocks should decline. 

Overview of the US Equities Market

Wall Street’s brief relief rally following the end of the U.S. government shutdown reversed sharply on Thursday as investors shifted focus to a looming deluge of delayed economic data, stretched tech valuations, and waning expectations for interest-rate cuts. U.S. stocks recorded their worst day in a month: the S&P 500 fell 1.7%, the Dow dropped 1.7% (around 798 points), and the Nasdaq slid 2.3%, with all three indices posting their largest declines since 10 October. Small caps were hit harder, with the Russell 2000 down 2.8%. Bitcoin also extended its decline, slipping back below US$100,000 to its lowest 4 p.m. level since May. 

 For 40 days, the government shutdown had delayed key economic releases, leaving markets “in the dark.” With President Trump signing spending legislation, investors now fear that the bunched-up data releases could trigger sharp swings in markets and disrupt expectations for a December Fed rate cut. CME data showed the probability of a cut next month falling to around 50%, from 63% the previous day and about 70% a week earlier. 

 The sell-off was led by technology stocks, which have already been under pressure as investors rotate away from crowded AI and growth trades into cheaper, more defensive areas. CoreWeave dropped 8.3%, extending a 25% weekly slide after warning about a data-centre project delay. Nvidia (-3.6%), Oracle (-4.1%) and Tesla (-6.6%) all fell sharply. Disney also weighed on the Dow, losing 7.7% after missing revenue expectations. 

Despite this, many investors remain fundamentally positive on AI and tech longer term but are increasingly cautious on lofty valuations, using the volatility to rebalance into value and defensive names. As Mark Malek of Siebert Financial noted, investors are “sticking to stocks” but rotating out of expensive growth into “safer and cheaper” opportunities. 

 Rate expectations are also being reassessed. Some strategists argue markets became overconfident on cuts after the Fed’s September projections signalled two more reductions this year, masking internal divisions between officials focused on labour weakness and those worried about persistent inflation. Upcoming data—particularly on jobs and inflation—will be crucial in clarifying the Fed’s next steps. 

There were pockets of resilience: Cisco rose 4.6% after upgrading its outlook, Verizon gained 0.8% on news of a planned 15,000-job cut, and energy was the only S&P 500 sector to finish higher, up 0.3%. Meanwhile, the 10-year U.S. Treasury yield ticked up to 4.11%, reflecting reduced expectations of imminent monetary easing, and silver eased 0.5% after hitting a record high the previous day.  

Overview of the US Treasuries Market and Other Fixed Income Markets

Doubts around a December Federal Reserve rate cut intensified as Minneapolis Fed President Neel Kashkari revealed he did not support the last rate cut and remains undecided about the next move. Kashkari said recent data show underlying economic resilience, arguing that the October cut may have been premature. For December, he said he can “make a case to cut” or “a case to hold,” depending on incoming data. His comments add to a growing chorus of Fed officials expressing scepticism about further cuts this year. 

Markets have taken notice. The probability of a December cut has fallen to around 50%, down from nearly 100% before the Fed’s October meeting, as investors react to increasingly hawkish commentary. While Kashkari does not vote this year, he participates in FOMC debates and reflects a wider divide within the central bank. Some policymakers remain concerned about pockets of labour-market weakness, particularly among low-income and subprime borrowers. Others highlight stable corporate earnings and optimism about 2026, underscoring the economy’s mixed signals. 

San Francisco Fed President Mary Daly also struck a neutral tone, saying it is too early to commit to a cut or no cut. Meanwhile, a more hawkish bloc, including Boston’s Susan Collins, Kansas City’s Jeff Schmid, Cleveland’s Beth Hammack, and Dallas’s Lorie Logan, argues that inflation, still around 3%, is too high to justify more easing. Even previously dovish officials, such as Chicago’s Austan Goolsbee, have shown renewed caution. 

By contrast, Governors Stephen Miran, Christopher Waller, and Michelle Bowman still support additional cuts, with Miran noting better-than-expected inflation readings. The conflicting viewpoints illustrate the Fed’s challenge: balancing softer hiring and pockets of household stress against resilient corporate performance and still-elevated inflation. 

The situation is further complicated by the government shutdown, which halted key economic reports. Although data releases will resume, it is unclear how much fresh information will be available before the Dec. 9–10 FOMC meeting. Policymakers may be forced to make a critical decision with only partial visibility on the labour market and inflation trends. 

Overall, the growing divide within the Fed, and reduced market confidence, suggests December’s decision will be finely balanced, with the path for interest rates now more uncertain than at any point this year. 

Figure 4 :Bond Yield Movements in the Past Week

Overview of the Australian Equities Market

Australian shares tumbled to their lowest level since July, with the S&P/ASX200 falling 1.36% to 8,634.5 in its worst session in 10 weeks and fourth straight day of losses. The broader All Ordinaries also dropped 1.41%. The index has now fallen 1.54% for the week, its weakest weekly performance since early April, and is down more than 5% since hitting a record high on 21 October. 

The sell-off was driven largely by hawkish comments from US Federal Reserve officials, which sharply reduced expectations of a December rate cut. CME FedWatch now places the odds at 50%, down from 95% a month earlier. A global pullback in risk assets also followed an unwinding of the AI trade, with stretched valuations prompting investors to rotate out of tech. 

Tech was by far the worst-performing ASX sector, plunging 4.4%, its biggest single-day fall in seven months. Heavyweight names saw steep losses: Megaport (-9.6%), Hub24 (-8%), and Life360 (-6.7%), which is now down over 20% this week. Banks were also hit hard, with all Big Four falling 1.6–2.6%. CBA dropped to a seven-month low, down 18% from its June peak. Miners declined across the board, with BHP, Fortescue and Rio Tinto all weaker, while gold miners also fell despite firmer gold prices. 

A handful of stocks bucked the trend: Pilbara, Liontown, and Santos posted small gains around 1%. Despite recent declines, the ASX200 remains up 5.8% year-to-date, though it is down 2.4% this quarter. The Australian dollar edged lower to 65.37 US cents, while cryptocurrencies slid, with Bitcoin dropping below US$99,000 for the first time since April. 

Key companies holding AGMs included Virgin Australia, Lend Lease, and Vault Minerals, while TPG Telecom traded ex-dividend. 

In economic update, the RBA forecasts economic growth near 2% annually over the next two years, around its long-term trend, supported by strong household consumption, which exceeded expectations in September. Unemployment is expected to hold around 4.4% through 2027, reflecting a still-tight labour market. Unit labour costs rose 5% in the year to June, underscoring continued wage and cost pressures. 

Overall, the RBA believes inflation will moderate gradually but remains wary of entrenched price pressures. Bullock reiterated that “just below three [per cent] is not good enough,” stressing the need for inflation to return sustainably to the 2.5% midpoint. While the RBA anticipates some easing in quarterly inflation ahead, it remains cautious amid signs that demand is still pressing against the economy’s supply limits.

Figure 6– World MSCIPE Ratio by country

 

Overview of the Australian Government Bond Market

Australian and US bond yields moved slightly higher over the week as markets continued to reassess interest-rate expectations. In Australia, the 3-month BBSW held steady at 3.64%, while government bond yields rose across the curve, reflecting a firmer outlook for inflation and a reduced likelihood of near-term rate cuts. The 3-year yield increased 11 bps to 3.76%, the 10-year rose 7 bps to 4.44%, and the 30-year gained 4 bps to 5.03%, signalling upward pressure on long-dated borrowing costs. The cash rate remained unchanged at 3.60%. 

US Treasury yields also edged higher, but the moves were more modest. The 2-year yield rose 2 bps to 3.59%, indicating slightly firmer expectations for the Federal Reserve’s policy path, while the 10-year and 30-year yields increased 3 bps each, reaching 4.13% and 4.73% respectively. These increases reflect continued resilience in US economic data and persistent inflation uncertainty. 

Meanwhile, the Australian dollar strengthened, rising 0.46 US cents to 65.27, supported by stable domestic rates and marginally higher commodity sentiment. Overall, the week’s data reflects a mild upward shift in global yields, with markets increasingly cautious about the timing and magnitude of future monetary easing. 

The RBA kept the cash rate at 3.6% in its November 2025 meeting and signalled a more hawkish stance, with Governor Michele Bullock indicating that interest rates could move “in either direction” as inflation is now expected to remain above the 2–3% target range until the second half of 2026. Markets, which just a week earlier fully priced in a February 2026 cut, have sharply repriced expectations: the likelihood of a May cut has dropped to 69%, and bond futures no longer assume any cut this cycle. The RBA was surprised by stronger September-quarter inflation, with underlying inflation at 3%, and now places greater weight on restoring price stability over protecting employment. 

 Inflation is forecast to peak at 3.7% in mid-2026 before easing to 2.6% by mid-2027, while real wages are expected to fall through 2026. Bullock noted temporary drivers such as travel and fuel but warned of persistent pressures in housing and hospitality. Economists from NAB, EY and Fortlake viewed the tone as hawkish, suggesting cuts are unlikely without a clear economic deterioration. Analysts including Jonathan Kearns consider a February cut unrealistic without exceptionally low CPI. Some strategists even see potential for rate hikes in late 2026. Markets now view the next move as equally likely to be up as down, reflecting a shift from easing bias to cautious neutrality. 

Looking Ahead: Major Economic Releases for the Week Ending 21th November

For the week ending November 21, 2025, Australian economic data will be in the spotlight, with the Composite Leading Index MM for October expected to reflect subdued economic momentum following recent softness, while Wage Price Index QQ and YY for Q3 are anticipated to show modest wage growth amid cooling labor market pressures. S&P Global PMI Flash for manufacturing, services, and composite in November may indicate continued expansion in services offsetting manufacturing weakness.

In the United States, economic data releases are experiencing broad delays for October and November figures following the recent end of the longest government shutdown in history, which disrupted data collection and processing at key agencies like the Bureau of Labor Statistics. Philly Fed Business Index for November is expected to show moderation in manufacturing sentiment, while Existing Home Sales for October may edge higher, pointing to tentative housing stabilization. These indicators might affirm the Federal Reserve’s gradual easing path to sustain growth, but ongoing delays could heighten market uncertainty and complicate timely policy assessments.

Major Economic Releases for the Week ending 21 Nov, 2025

Date	Country	Release	Consensus	Prior
Wednesday, 19/11	Australia	Composite Leading Idx MM	n/a	-0.03
Wednesday, 19/11	Australia	Wage Price Index QQ	0.8	0.8
Wednesday, 19/11	Australia	Wage Price Index YY	3.4	3.4
Thursday, 20/11	United States	Philly Fed Business Indx	2	-12.8
Thursday, 20/11	United States	Existing Home Sales	4.08	4.06
Thursday, 20/11	Australia	S&P Global Mfg PMI Flash	n/a	49.7
Thursday, 20/11	Australia	S&P Global Svs PMI Flash	n/a	52.5
Thursday, 20/11	Australia	S&P Global Comp PMI Flash	n/a	52.1
Thursday, 13/11	United States	Initial Jobless Clm	225	218

Source: Refinitiv

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