UK FISCAL: Could the income tax higher rate threshold be lowered? (1/2)
Oct-30 12:35
- This morning's newspapers are full of Prime Minister Kier Starmer refusing to rule out income tax increases in yesterday's PMQs - with the Telegraph backing up weekend reports that a 2ppt increase in the basic rate is under consideration. However, a reduction to the higher rate threshold may be a politically more acceptable solution.
- A Sky News report earlier this week reported that it had seen an internal working definition from the Treasury that included the definition of "working people" as the bottom two thirds of earners - effectively those who earn around GBP45k or less.
- Knowing this definition also increases the likelihood that the higher rate threshold is reduced (it currently comes in at GBP50,270). According to the Treasury's calculations earlier this year, a reduction in the higher rate threshold of 10% (so to just over GBP45k) would raise around GBP7bln/year.
- To put this in context a 1ppt increase in the basic rate would raise a little over GBP8bln - so a move in the threshold would raise only a little less.
- Of course some of this could be offset if there is a reduction in the employee NIC threshold (at the moment that is aligned with the income tax threshold so combined income tax + NIC goes from 32% at basic rate levels to 42% combined at higher rate levels). If the employee NIC threshold was not simultaneously lowered, this would lead to an effective combined marginal rate of 52%. These kind of kinks in combined rates are not without precedent in the income tax system, but the extra revenues may be too tempting for the government to resist (if this is indeed the policy).
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US TSYS: Tnotes is testing the initial resistance
Sep-30 12:35
- Some pick up in Volumes in Treasuries, with Tnotes (TYZ5) making another attempt at the small initial resistance noted at 112.22.
- As also previously mentioned during the Morning European session, better is seen at 113.00.
- USA is bought in 2.1k, TYA 7k, all cumulative Volumes, and over 25k lots goes through in the 10yr Futures in the past 8 minutes or so.
- Since the German Bund lags, underperforms, the Tnotes/Bund spread is tighter, but for now away from any support level.
US: MNI POLITICAL RISK - Democrats Dig In As Govt Shutdown Looms
Sep-30 12:20
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- President Donald Trump departs the White House at 08:00 ET 13:00 BST for Quantico, Virginia, where he will deliver remarks at an unusual assembly of senior US military officials at 09:00 ET 14:00 BST. Trump will return to the White House to deliver an announcement at 11:00 ET 16:00 BST and then sign Executive Orders at 15:00 ET 20:00 BST.
- A meeting between Trump and Congressional leaders did little to slow the government from barrelling towards a shutdown at midnight tonight. Democrats have dug in, framing the standoff as a struggle over healthcare. We have a rundown of the consquences of a shutdown and the routes out of a shutdown, inside.
- Trump announced he will impose a 100% tariff on films made outside the US and a separate “substantial” tariff on furniture.
- Trump announced yesterday at a joint White House press conference alongside Israeli Prime Minister Benjamin Netanyahu that Israel has accepted a 20-point plan to end the war in Gaza. While the plan has the backing of Israel, including hardline members of Netanyahu’s coalition, and a broad cross-section of Arab and regional powers, Hamas’ response is uncertain.
- The US is considering Ukrainian President Volodymyr Zelensky’s request for Tomahawk cruise missiles.
- Venezuelan President Nicolás Maduro has given himself additional security powers in light of Washington's military presence in the region.
- Poll of the Day: American support for Israel has undergone a 'seismic reversal'.
Full Article: US DAILY BRIEF
EGB FUNDING UPDATE: Portugal confirms no auctions likely in Q4
Sep-30 12:13
- Portugal has confirmed that it has completed its 2025 funding needs and that there is no further bond issuance planned for the year. However, "IGCP may still consider outright or exchange/buyback auctions in order to ensure the efficient functioning of the market, sustain investor engagement along the different segments of the curve, and promote liquidity across the PGB curve."
- MNI would be surprised if we don't see at least one exchange auction in the quarter.
- "Net issuance of Treasury Bills will decrease from the 3rd quarter estimate of EUR 4.6 billion to a projected amount of net issuance of EUR 2.7 billion in 2025."
- There will be just one bill auction date (19 November) with E1.00-1.25bln (combined) of the 6-month May 22, 2026 BT on offer alongside the new 12-month Nov 20, 2026 BT.
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