CANADA: CAD Rates Holding Onto Post-CPI Adjustment
Nov-19 18:05
- BoC-dated OIS has held onto its initial reaction to stronger-than-expected core CPI inflation in October, tracking 33-34bp of cuts priced for Dec 11 since the release vs ~36bp prior.
- Analysts previously calling for a second 50bp cut next month haven’t been swayed (CIBC, RBC and TDS all sticking with a 50bp cut), with GDP for Q3 (Nov 29) and the jobs report for Nov (Dec 6) still to come.
- The CPI surprise has helped Can-US 2Y yield differentials lift a touch further, currently at -108bps vs -110bp prior, -111.5bp at yesterday’s close and -115bp from Friday. However, barring the past few weeks, these are still levels that were last seen in the 1990s.
- USDCAD is currently back close to its initial shift lower. At 1.3981 vs an earlier low of 1.3968 that didn’t trouble support at 1.3959 (Nov 1 & 6 highs).
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RATINGS: UK, Italy Affirmed by S&P; Scope Downgrades France
Oct-18 21:02
Recapping sovereign ratings actions today:
- S&P affirms Italy's Long-Term Local Currency Debt Rating at BBB, outlook remains stable
- S&P affirms the UK's Long-Term Local Currency Debt Rating at AA, outlook remains stable
- Scope downgraded France to AA- (from AA) with a stable outlook
- S&P did not affirm/update the ratings of Greece or the Netherlands as part of their semi-annual review of the sovereigns.
US FISCAL: Budget Deficit Rises As Interest Payments Soar
Oct-18 20:27
The US's September budget balance came in very close to expectations with a $64B surplus, just the 2nd monthly surplus posted in the 2024 fiscal year just ended (Monthly Treasury Statement here - PDF).
- For the fiscal year as a whole (Oct-Sep), the nominal deficit came in at $1.83T, equating to 6.4% of GDP - that's up from $1.70T in FY 2023 (6.2% of GDP).
- For the year, revenues rose by a little under $500B but outlays grew by over $600B. Notably, interest rose 29% to $1.13T (net $882B), with the net figure 3.06% of GDP: the highest since 1996. That came as the weighted average interest rate of debt outstanding rose 35bp on the year to 3.32%, while social security payments rose by $103B on higher cost of living increases and more retirees.
- The 2025 fiscal year deficit is not expected to be much changed as a percentage of GDP, though that could depend on the November election results.
- CBO director Phillip Swagel told MNI recently America has fiscal headroom in the near-term but spending is on an unsustainable track over the long-term (link).
MNI: US SEP TREASURY BUDGET $64.3B
Oct-18 20:00
- MNI: US SEP TREASURY BUDGET $64.3B
