EM LATAM CREDIT: Argentina: 2026 Budget Passes Committee – Positive
(ARGENT; Caa1/CCC/CCC+)
• The 2026 budget can now be debated on the floor of the Lower House now that ruling LLA party succeeded in getting the budget proposal out of the budget committee. The news is positive in showing a coalition of support from allied political parties including the PRO and the UCR (Radical Civic Union).
• ARGENT 35s were quoted ½ point higher today on this news, leaving them about 4 points higher since June 30th and about 5 points higher YTD. President Milei and Economy Minister Caputo were scheduled to meet with some investors privately in NY on Friday hosted by the Americas Society, according to Bloomberg. They will likely be checking the appetite for a potential debt issuance in the coming months.
• The budget debate will likely start once the new Congress is installed December 10th and the plan is to have it approved before year end. Labor reform is at the top of the list of priorities with the expectation to move 8 million informal workers to formal payrolls, according to sources reported by the Buenos Aires Herald. Tax policy will also be a top priority. Pension reform will be saved for the next term if there is one.
• There will be plenty of debate about spending plans but the overriding theme will be that there will be no budget deficit. Budget assumptions were 10.1% inflation for 2026, down from an estimated 24.5% for 2025, real GDP growth of 5% and an exchange rate of ARS1,423 lower than the current ARS1,474 official rate, according to the Buenos Aires Herald.
• The government is currently operating from the 2023 budget, so funding has been allocated by decree in 2024 and 2025. If the legislature can pass a 2026 budget, that will cement into law the reforms being contemplated.
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US: No Change In Strategy From Johnson Ahead Of Fifth Govt Funding Vote
Speaking at a press conference, House Speaker Mike Johnson (R-LA) did not indicate a shift in the GOP’s government shutdown strategy ahead of a fifth Senate vote on the House-passed Nov. 21 funding bill at roughly 17:30 ET 22:30 BST.
- Johnson said, “We need [Democrat Leader] Chuck Schumer [D-NY] to reopen the government and as soon as he does that, I will bring everybody back.”
- Johnson said on potential Obamacare negotiations, “The last time I checked, it’s Oct. 6. We have the entire month of October... We have to get the government open again to do it”
- Johnson: “People are starting to recognize this is not a Republican shutdown. It is a Schumer Democrat shutdown… They'll have another opportunity this evening. And I sure pray... a handful of additional commonsense people on the Democrat side will change their votes, reopen the government.”
- It’s worth noting that shutdowns rarely happen when one party controls the White House and both chambers of Congress. As Democrats have forced a shutdown by using leverage over the Senate filibuster, the GOP has the power to control the floor of both chambers.
- Senate Majority Leader John Thune (R-SD) intends to re-run the CR vote until Democrats fold. Johnson’s control of the House means Democrats cannot pass any competing funding legislation, and he is using his scheduling authority to keep lawmakers out of Washington, preventing any rank-and-file negotiations.
- While there is no sign that Democrats are ready to fold yet, it is hard to see Democrat unity in the Senate holding in the long term.
GBP: GBPUSD Aided Toward Friday High on NY AM Dollar Weakness
The USD's NY morning fade has aided EURUSD and GBPUSD well off earlier lows, helping EURUSD almost entirely erase the PM resignation losses. EURGBP still trades heavy, however, meaning GBPUSD's rally has the price within range of the Friday high at 1.3486.
- BoE's Bailey is set to speak later today at 1600BST. It's unclear whether he'll comment directly on monetary policy (he's appearing at Scotland’s Global Investment Summit 2025) - but markets remain strongly of the view that additional BoE easing this year is unlikely (6bps of rate cuts currently priced through year-end).
- That said, it's fiscal and political risk that's likely a more primary GBP driver for the rest of this year - The front-end of the GBP vol curve provide a further signal for market concern over the Autumn Budget. The flatter front-end of the curve and the building premium for 2m implied vols shows markets building a risk premium into the event.
- This effect is particularly evident in EUR/GBP, for which markets continue to favour as a GBP weakness play given the unpredictability of the USD into year-end.
- We see GBP's driver as the fiscal policy mix ahead. The Gilt curve and, in particular, the longer-end has regained a sense of stability after being marked sharply higher at the beginning of September. How valid and long-lasting this proves to be should determine GBP/USD's ability to trade within range of 1.3525 (50% mid-Sept downleg) and make meaningful headway toward the bull trigger of the July 1st high at 1.3789.
BOE: Bailey text due for release at 16:00BST / 11:00CET
- Governor Bailey is due to speak today to deliver the keynote speech at Scotland’s Global Investment Summit 2025. The text will be released at 16:00BST here.
- There is no title attached to the speech and it is therefore unknown at this point whether Bailey will be discussing anything relevant for monetary policy.
- With speeches from both Deputy Governors Breeden and Ramsden last week leaning to the dovish side (neither ruled out voting for a November cut) and with Dhingra and Taylor voting for a sequential cut in September, Governor Bailey's position as the swing voter has been further cemented in our view.
- Therefore anything he says on monetary policy could be market moving, particularly anything on the dovish side given current market pricing (with only 1bp priced for a November cut and 5bp priced by year-end).
