US: Democrat Appropriators Say GOP "Walking Away" From Govt Funding Talks
Feb-28 17:21
The top Democrat appropriators, Senator Patty Murray (D-WA) and Rep Rosa DeLauro (D-CT), have issued a statement claiming Republicans have walked away from government funding discussions, raising the risk of a government shutdown on March 15.
- Statement: “It’s incredibly disappointing that Republican leadership is walking away from bipartisan negotiations to fund the government—and raising the risk of a shutdown in so doing.
- “Republican leadership’s plan to pass a full-year continuing resolution with Musk’s devastating ‘DOGE cuts’ would give Trump new flexibility to spend funding as he sees fit. While Elon Musk has been calling for a shutdown, Democrats have been working to pass bills that make sure Congress decides whether our schools or hospitals get funding—not Trump or Musk.
- “Their plan would only help Trump and Musk cut off support for our veterans, cancel lifesaving cancer research, and threaten seniors’ Social Security benefits. As ever, we remain ready to work with our colleagues to pass full year appropriations bills and invest in families and our national security—and we hope Republicans will return to the table to do just that.”
- Although it is not considered in the best interests of Democrats to force a shutdown, Democrats have leverage: Republicans will require at least eight Democrat votes to clear the Senate filibuster and a likely a handful of Democrat votes in the House to offset the Republican deficit hawks.
- According to Polymarket there is a 56% implied probability of a shutdown in 2025, that risk is likely to rise in light of the statement.
Figure 1: Government Shutdown in 2025 (Polymarket)
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FED: Instant Answer Questions for January FOMC
Jan-29 17:19
The Instant Answers questions that we have selected for the January FOMC statement are as follows (due to be released at 1400ET):
- Federal Funds Rate Range Maximum
- Number of dissenters on size of rate move
- Any change to the Fed’s description of inflation?
- Any change to guidance on rates in sentence that references “extent and timing” of additional rate adjustments?
BONDS: EGBs-GILTS CASH CLOSE: Early Yield Drop Reverses On Higher Energy Prices
Jan-29 17:08
European core yields saw an early drop reverse late in the session, leaving them a little higher Wednesday.
- Bunds and Gilts strengthened after an overnight trade, in line with a US Treasury rally that kicked off late Tuesday after a solid 7Y bond auction.
- However, a rise in European natural gas prices to 15-month highs amid supply issues and lower temperature forecasts in the region, applied pressure on the space toward the cash close.
- Spanish Q4 GDP came in firmer-than-expected; UK Chancellor Reeves' policy speech was longer-term focused, with little in the way of short-term implications or market movement.
- The German curve bear steepened modestly, with the UK's bear flattening.
- Periphery EGB spreads tightened. OATs underperformed the rest of the space, with spreads widening rift amid discord between the French government and Socialists.
- Focus after hours is on the Federal Reserve decision and communications, and of course Thursday sees the ECB decision (a 25bp cut remains nearly 100% priced - MNI's preview is here). We also get Spanish January flash inflation data (MNI's Eurozone inflation preview went out today, PDF here).
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.6bps at 2.278%, 5-Yr is up 1.6bps at 2.381%, 10-Yr is up 1.8bps at 2.583%, and 30-Yr is up 2.4bps at 2.804%.
- UK: The 2-Yr yield is up 2.1bps at 4.331%, 5-Yr is up 1.5bps at 4.325%, 10-Yr is up 0.8bps at 4.622%, and 30-Yr is up 0.3bps at 5.177%.
- Italian BTP spread down 1.6bps at 107.9bps / French OAT up 2.5bps at 74.6bps
EUROPEAN INFLATION: MNI Eurozone Inflation Preview - January 2025
Jan-29 16:59
We've just published our preview of the Eurozone January flash inflaiton round - PDF Analysis Here:
- The Eurozone January flash inflation round is split across two weeks, with Spain, France and Germany providing data on Thursday/Friday (Jan 30-31), before Italy and the Eurozone-wide prints cross on Monday.
- The data will set the tone for inflation developments through the rest of this year, with the annual basket reweighting taking place alongside regular annual price resets in several categories.
- The MNI median of sell-side forecasts points to headline at 2.4-2.5 % Y/Y (vs 2.4% prior) and core to remain at 2.7% Y/Y.
- Headline inflation is likely to be upwardly impacted by an acceleration in Brent crude and natural gas prices in January, while services inflation remains in focus for the core measure.
- The ECB are considered near-certain to cut rates by 25bps at its January 30 meeting, with a subsequent 25bp cut in March almost fully priced - but there remains uncertainty around the speed and magnitude of cuts beyond Q1, with inflation data a key input into those decisions.
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