US FINANCIALS: CIBC $Benchmark; 4NC3 , 4NC3 FRN SOFR Equiv FV (CM)

• Financing needs for 2026 total E24.677bln (E8.871bln from MT/LT redemptions, E5.200bln interest on debt, E8.790bln of early repayments (including T-bill stock reduction), E6.739bln from other cash requirements (RRF loans, capital increases etc). This is partially offset by a projected primary surplus of E6.510bln.
• Financing sources:
  • GGB issuance E8.000bln (E8.0bln 2025 plan, E6.2bln executed).
  • Other financing sources (NGEU, EIB, CEB, etc.) E4.200bln
  • Proceeds from equity and investment fund shares E618mln
  • Decrease in cash reserves: E11.859bln
• Three GGB auctions planned for H1, on Feb 11, Apr 15 and Jun 17. All re-openings.
• T-bill gross target appears unconfirmed. 12 auctions planned for H1.
• The full plan can be found here (link)

Prime Minister Sébastien Lecornu continues to hold meetings with leaders of political groups in an effort to find accord on moving forward with a state budget for 2026. He is currently holding talks with leaders from the French Communist Party after meeting with leaders of centre-left Socialist Party (PS) and those in the centrist bloc (Renaissance, MoDem, Horizons, LIOT) earlier. Lecornu will next meet with leaders from the left-wing environmentalist Ecologists, then the conservative Les Républicains. 

• After a joint committee from the Senate and National Assembly failed to reach an agreement on the draft budget on 19 December, Lecornu faces the choice of introducing a special law that would allow for tax raising and government spending to continue into 2026 based on existing fiscal legislation, or forcing through the 2026 budget without parliamentary approval using Article 49.3 of the Constitution (risking a censure vote in parliament).
• Under deadlines set by Article 47 of the Constitution, Lecornu has until midnight on 23 December to either pass a budget, pass the special law, or utilise Art. 49.3 to force the budget through.
• Once the party consultations are concluded, a meeting of the Council of Ministers will take place in the presence of President Emmanuel Macron at ~1930CET (1330ET, 1830GMT). It is at this point that Lecornu could present the special bill to the cabinet.
• If Lecornu pursues this path, Roland Lescure, Minister of the Economy and Public Accounts, and Amélie de Montchalin, Minister in charge of Public Accounts, are expected to speak in front of the National Assembly's Finance Committee in relation to the bill at ~2130CET (1530ET, 2030GMT) with the view of holding a vote this evening, before the Senate gives its approval tomorrow. 

Gilt futures stick to the range established in early London trade, with lows holding during a late morning retest before a modest recovery rally.

• Contract last -17 at 90.77.
• Support and resistance of note located at 90.50 & 91.93, respectively. Post-BoE price action tilts focus back to support levels.
• OI in the contract has fallen below levels that prevailed on the day of the Budget.
• Yields 1bp lower to 1bp higher, twist steepening develops a little further.
• 2s10s less than 1bp off the November closing high (79.52bp).
• Recent headline flow has confirmed that the spring forecast will be issued on 3 March.
• No real impact from the ongoing uptick in crude oil futures.
• SONIA futures +0.5 to -2.0.
• BoE-dated OIS continues to indicate ~38bp of easing/just over 50% odds of 50bp of cuts being delivered during ’26.
• Goldman Sachs highlight dovish risks to current pricing, writing “given relatively little BoE easing is now priced (2-Year SONIA remains 50bp above our terminal forecast), and the opposition to further easing seemingly hinges on the perception of upside risks to inflation (which we expect to decelerate meaningfully further), we see risks as skewed to lower yields. Further, with all MPC members acknowledging the slowdown in demand, and the discussion centred more on the cadence than the endpoint of cuts, we think the underlying ingredients supporting disinflation should keep the front-end relatively insulated should activity improve”.