BRAZIL: Congress Advances IOF Tax Compensation Measure, Lula’s Approval Edges Up
Oct-08 11:17
- Last night, a joint economic committee of Congress approved a provisional measure that offers alternatives to raising the Financial Transactions Tax, with 13 members voting in favour and 12 against. The measure will now need to be approved in the Lower House, followed by a separate vote in the Senate.
- Speaking earlier, Finance Minister Haddad acknowledged that potential revenue from the measure next year will be less than the initial estimate of BRL 20.6bn, but above the BRL 17bn figure mentioned yesterday. Haddad said that there had been a strong call to keep credit notes exempt from income tax and that concessions had to be made to get the bill approved. He added that the issue of online gambling taxation could be revisited in the future.
- Local assets underperformed yesterday amid renewed fiscal concerns, after Haddad said that the government is mapping out the possibility of adopting fare-free public transport in the country. Local equities fell 1.6%, while long-end DI swap rates rose 12bp and USDBRL closed up 0.7% at 5.35, narrowing the gap to key resistance at the 50-day EMA, at 5.4001.
- Today, Haddad attends a press conference about the Eco Invest programme at 1800BST(1300ET), while BCB Governor Galipolo meets with VP Alckmin at 1300BST(0800ET). On the data front, focus remains on Sept IPCA inflation figures tomorrow.
- In other news, President Lula’s approval rating rose to 48% in September, from 46%, according to a Quaest survey, benefitting from a recent improvement in US relations.
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OUTLOOK: Price Signal Summary - Bull Cycle In Bunds Intact
Sep-08 11:15
- In the FI space, Bund futures rallied sharply higher Friday and this has resulted in a break of resistance at 128.87, the Aug 28 high and short-term bull trigger. The climb undermines a recent bearish theme and highlights a stronger reversal. Price has moved through the 129.00 handle, signalling scope for an extension towards 129.50, the Aug 5 high. Key support and the bear trigger has been defined at 127.61, the Sep 3 low. First support is at 128.25, the Sep 4 low.
- A strong rally in Gilt futures last week highlights a stronger corrective cycle. Note that a move higher is allowing an oversold trend condition to unwind. The contract has breached initial firm resistance at 90.84, the Aug 28 and 29 high. A continuation higher would open 92.06, the Aug 14 high. For bears, a reversal lower and a resumption of the bear leg would signal scope for a move towards 89.22 next, a 1.618 projection of the Aug 21 - 27 - 28 price swing. Initial support lies at 90.31, the Sep 4 low.
PIPELINE: Corporate Bond Roundup: Westpac NZ, KDB on Tap
Sep-08 11:14
- Date $MM Issuer (Priced *, Launch #)
- 09/08 $Benchmark Korea Development Bank 5Y SOFR+68a
- 09/08 $Benchmark Westpac NZ 5Y +85a
- 09/08 $Benchmark Denso 5Y inv calls
- 09/08 $Benchmark PIF 10Y +120a
- 09/05 No new US$ corporate issuance Friday after $98.95B total since Tuesday- most since the first week of January ($135.55B)
US TSYS: Modestly Twist Steeper Within Payrolls Driven Ranges
Sep-08 11:01
- Treasuries sit twist steeper but within Friday’s payrolls-driven range.
- The JGB curve twist steepened following Sunday’s resignation of LDP leader Ishiba although spillover to Treasuries was limited with the Asia cash open.
- It’s a quieter start to the week with Trump remarks to the White House Religious Liberty Commission at 1010ET possibly the main scheduled event along with the NY Fed's consumer survey including its inflation expectations.
- Greater focus is on preliminary payrolls benchmark revisions, PPI and CPI over Tue-Thu, with previews for those out later today and tomorrow.
- Cash yields are between 0.8bp lower (2s) to 1.8bp higher (30s).
- Curves are off recent steeps, including 2s10s at 58.3bp off Wednesday’s 63.9bp and 5s30s at 119.3bp off 126.9bp post-NFPs (multi-year steeps).
- TYZ5 trades near unchanged at 113-11 (-01+) on modest cumulative volumes of 265k.
- The post-payrolls high of 113-21+ marked another fresh short-term cycle high and points to a bullish structure. It marks resistance after which lies 113-26+ (2.764 proj of Jul 15-22-28 price swing) whilst support is seen at 112-28+ (Sep 5 low).
- Data: NY Fed consumer survey Aug (1100ET), Consumer credit Jul (1500ET)
- Bill issuance: US Tsy $82B 13W & $73B 26W bill auctions (1130ET)
- Politics: Trump delivers remarks (1010ET)
