BRAZIL: Expenditure Cuts To Be Announced In Upcoming Spending Review Package
Oct-16 10:45
- The government’s economic team aims to cut BRL 30bn-50bn in spending in an upcoming spending review package, O Globo reports. Measures may include cuts of BRL3-4bn in public sector salaries and changes to unemployment insurance and are expected to be presented to congress after the upcoming second round of municipal elections.
- The news follows remarks from Planning Minister Simone Tebet yesterday, who said that it’s time for a structural review of public spending, which will be announced after the initial spending cut measures have been presented. She said that the government aims to present as many measures as possible this year and that tax expenditures will be re-discussed in 2025.
- On the data front today, the calendar is light, with just FGV IPC-S CPI inflation crossing at 1200BST(0700ET). President Lula will hold a meeting with the Brazilian Federation of Banks at 1530BST(1030ET), while Mines and Energy Minister Alexandre Silveira will participate in a press conference at 1730BST(1230ET) about the Ministry’s measures to re-establish power in the Sao Paulo metropolitan area.
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STIR: Long Setting In SFRU4 Dominated Friday As Odds Of 50bp Cut Reasserted
Sep-16 10:44
Long setting in SFRU4 dominated from a positioning standpoint on Friday, with the dovish WSJ & FT articles covering this week’s FOMC reasserting odds of a potential 50bp cut.
- Long setting was also the most prominent factor further out the strip, with pockets of short cover seen.
- Market pricing covering the impending FOMC is unusually balanced heading into the event (see prior bullet for greater details), keeping participants attuned to the risk of the potential for further unofficial guidance during the pre-FOMC blackout period.
- J.P.Morgan reaffirmed their out of consensus call for a 50bp cut late Friday.
- Our Fed preview can be found here.
- We will update that document with sell-side views later today.
| 13-Sep-24 | 12-Sep-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRM4 | 1,135,867 | 1,133,208 | +2,659 | Whites | +82,991 |
SFRU4 | 1,414,233 | 1,350,979 | +63,254 | Reds | +1,840 |
SFRZ4 | 1,240,908 | 1,237,882 | +3,026 | Greens | +12,695 |
SFRH5 | 1,031,475 | 1,017,423 | +14,052 | Blues | +3,924 |
SFRM5 | 869,022 | 887,553 | -18,531 |
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SFRU5 | 742,007 | 753,976 | -11,969 |
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SFRZ5 | 995,705 | 977,200 | +18,505 |
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SFRH6 | 637,871 | 624,036 | +13,835 |
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SFRM6 | 596,657 | 602,062 | -5,405 |
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SFRU6 | 532,185 | 532,693 | -508 |
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SFRZ6 | 549,174 | 537,493 | +11,681 |
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SFRH7 | 344,507 | 337,580 | +6,927 |
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SFRM7 | 311,921 | 310,182 | +1,739 |
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SFRU7 | 228,708 | 230,849 | -2,141 |
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SFRZ7 | 216,756 | 214,700 | +2,056 |
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SFRH8 | 169,716 | 167,446 | +2,270 |
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STIR: Another Step Closer To A 50bp Cut On Wednesday
Sep-16 10:43
- Fed Funds implied rates sit with a 50bp cut from the FOMC as more likely than not on Wednesday, with 40bp priced vs 36bp late Fri (OIS meanwhile showing 37.5bp).
- It continues to be influenced by Thursday’s WSJ and FT articles on the decision being a “close call”, which prompted a significant shift away from 28bp priced after CPI and PPI data.
- Former NY Fed President Dudley says he thinks the Fed should and will cut 50bp.
- At current pricing, the FOMC is set to ‘surprise’ markets by the most in many years no matter whether it cuts by 25bp or 50bps.
- As such, markets will be on tenterhooks for any further blackout steers in the press today in what’s otherwise a quiet session before tomorrow’s retail sales report.
- Cumulative cuts from 5.33% effective: 40bp Sep, 78bp Nov, 119bp Dec, 157bp Jan and 232bp June.
OUTLOOK: Price Signal Summary - WTI Trend Direction Remains Down
Sep-16 10:34
- On the commodity front, a bullish structure in Gold remains intact and the metal is starting the week on a firm note, trading once again, to a fresh all-time high. Last week’s gains confirmed a resumption of the primary uptrend The focus is on $2600.0 next. Firm support lies at $2508.5, the 20-day EMA.
- In the oil space, WTI futures remain in a bearish condition. Last Tuesday’s strong sell-off reinforces current conditions and this confirmed an extension of the bear cycle. The most recent bounce appears to be a short-term correction. A resumption of the downtrend would open $63.93 next, 1.618 projection of the Apr 12 - Jun 4 - Jul 5 price swing, ahead of the psychological $60.00 handle. Firm resistance is at $71.06, the 20-day EMA.
