BONDS: EUREX ROLL PACE
EUREX ROLLS: All below pace, BUT no surprises, with investors favouring to hold ahead of the busy week.
There's some early pick up in pace, in shorter end, with half the front Month Volume in Bobl spread related and just under half in Schatz, expect for these to pick up across Eurex now:
- Buxl: 14% (below pace).
- Bund: 13% (below pace).
- Bobl: 25%.
- Schatz: 17% (below pace).
- BTP: 12% (below pace).
- BTS; 16% (below pace).
- OAT: 12% (below pace).
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CNY: RTRS Sources Flag State-Back Bank Defence Of Yuan
RTRS sources have noted that “China's state banks were heavy sellers of dollars on Wednesday, steadying the yuan as it came under pressure in currency trade. One of the people said the selling was "very forceful" to defend USD/CNY around 7.1820 in the onshore spot market.”
UK: Times-Hunt: Little Room For Tax Cuts In Budget
Steven Swinford at The Times posts on X: "[Chancellor] Jeremy Hunt warned Cabinet that tax cuts in Spring budget may be smaller than expected. ‘We are not likely to have as much room for tax cuts as we had in the Autumn,’ he said. He blamed ‘major structural weakness’ of low productivity Treasury projections suggest there is £14bn of headroom compared to £35bn at time of Autumn Statement. Ministers say political imperative is to go big but are concerned the fiscal constraints may not allow."
- The Times report comes after the IMF warned the UK gov't about engaging in significant tax cuts in the budget. The IMF "advised the UK against further tax cuts", as it launched its latest assessment of the world economy. The organisation claimed that supporting public services and fixed investment would mean greater gov't spending than was indicated in fiscal plans at present.
- There is pressure on Hunt and PM Rishi Sunak to engage in significant tax cuts.This is not only in an effort to boost the Conservatives' poor opinion polling numbers, but also on a broader ideological point for MPs from the centre-right party, who opposed the tax burden on individuals sitting around the highest levels in the post-war era.
GERMAN DATA: Broad-Based Retail Sales Decline Continues
German December retail sales (ex. motor vehicles) were -1.6% M/M (seasonally- and calendar-adjusted, vs +0.6% cons and -0.8% prior, revised from -2.5%) and -4.4% Y/Y (vs -1.9% cons and -1.2% prior, revised from -2.0%). This is the second consecutive decline on a monthly basis, while the seasonally adjusted index hit the lowest level seen since February 2021.
- For 2023 real retail sales (ex. motor vehicles) fell -3.3% Y/Y (vs -0.7% in 2022) but were still +1.3% higher than pre-Covid levels (2019).
- The December decline was broad-based with food, drinks and tobacco sales declining -3.4% Y/Y in real terms. All major subcategories of non-food retail sales fell on a yearly basis, including furnishings, household appliances and building supplies at -8.7% Y/Y (vs -6.8% prior) and internet and mail order business at -6.8% Y/Y (vs -2.0% prior).
- Looking at 2023 Christmas business through combining indices for November and December to control for shifts, even after accounting for the positive revisions, non-food sales declined -2.8% Y/Y in real terms, confirming the weak picture.
- Overall, the data is suggestive of ongoing weakness in German consumer demand.
MNI, Destatis
