EUROPEAN FISCAL: Caveats to German Fiscal Balance Figures, Tax Estimates Next
The German government's draft budgetary calculations contain general government fiscal balance figures of 4.75% in 2026, 4.25% in 2027, and 3.75% in 2028. These figures tend to be on the higher end of sellside analyst expectations we've seen recently. However, keep in mind the following:
- The estimates are based on spring growth projections which take the currently planned pace of fiscal ramp-up into account only to some extent. If the updated autumn projections ('German Government GDP Revisions Likely To Lower Financing Gap' - MNI, October 8) were taken into account, that would imply a deficit of only 3.5% in 2026 and 2.5% in 2027, the government comments. Having said this, that is not a comparable number as it does net off the escape clause for defence spending which is 1.0% of GDP. So more comparable numbers would be a deficit of 4.5% in 2026 and 3.5% in 2027.
- Mentioned sellside analysts see risks of infrastructure spending lagging behind plans in Germany, as it did previously. This would imply downside to the government's current estimates.
- The fiscal balance estimates result in a debt-to-GDP forecast of 69.25% in 2026, 73% in 2027, and 76.5% in 2028, which don't come as a surprise following last week's "stability council" meeting ('Stability Council Sees German Govt Debt At 80% GDP In 2029' - MNI, October 7).
Next up in the pipeline of German fiscal are updated tax projections, scheduled for publication on October 23. Handelsblatt sees a "light plus" incoming versus spring figures. These tax projections, contrary to the official budget figures from above, will take into account the government's updated growth view.
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FED: MNI Instant Answers: September FOMC Statement and SEP
The questions that we have selected for Instant Answers for the September FOMC statement and SEP (scheduled to be released at 1400ET Wednesday):
- Fed funds rate range maximum
- Number of dissenters to size of rate move
- Number of dissenters preferring a larger cut
- Median projection of fed funds rate at end-2025
- Median projection of fed funds rate at end-2026
- Median projection of fed funds rate at end-2027
- Median projection of fed funds rate at end-2028
- Median projection of longer run fed funds rate
- Number of 2025 dots > 4.125%
- Number of 2025 dots > 3.875%
- Number of 2025 dots < 3.875%
- Number of 2025 dots < 3.625%
US TSYS/SUPPLY: 20Y Preview: WI Yield 26bp Lower Than Last Month
- $13bn 20Y re-open at 1300ET (912810UN6)
- As a barometer of recent duration demand, last week’s 30Y auction was on the screws but with stronger details as the bid-to-cover and indirect take-up increased.
- That’s in contrast to last month’s 20Y auction which was in-line (high yield 4.876% vs WI 4.877%) but with weaker details.
- The bid-to-cover slipped from 2.79 to 2.54 for its lowest since May and before that February.
- More notably, the indirect take-up dropped from 67.4% to 60.6% for its lowest since Feb 2024 and before that Nov 2021. Directs took up some of that slack however, rising from 21.9% to 26.5% whilst dealer take only increased from 10.7% to 12.9%.
- Select stats from the past five auction average: Trade through by 0.1bp (ranging from through by 1.5bp to tailing by 1.2bp), bid-to-cover of 2.62 (ranging from 2.46 to 2.79), indirect dealer take of 66.9% (ranging from 60.6% to 70.7%) and dealer take of 14.2% (range 10.7% to 17.0%).
- Bloomberg currently shows the WI at 4.6175% for some 26bp lower than last month’s auction which could trim some relative demand. It would mark the lowest high yield since Oct 2024.
FED: US TSY TO SELL $100.000 BLN 4W BILL SEP 18, SETTLE SEP 23
- US TSY TO SELL $100.000 BLN 4W BILL SEP 18, SETTLE SEP 23
