GREECE: Fitch May Deliver Upgrade To BBB After Hours; Already In Price For GGBs
Nov-14 12:55
Fitch is scheduled to review Greece's sovereign rating after hours (current rating: BBB-; Outlook Positive). Conditions for an upgrade to BBB appear to have been met, but such a move is already at least partially in the price for GGBs.
- At its May review, Fitch said that positive ratings action would be driven by "Increased confidence that the rapid decline in general government debt/GDP will prevail over the medium term, driven by substantial primary surpluses" and an "improvement in medium-term growth potential and performance".
- On the fiscal side, Greece's recent performance is notable, with primary balance metrics handily outperforming peers and the Eurozone overall. The country's long average maturity of debt also means interest expenses are low relative to nominal GDP growth. Greece's finance minister noted this morning that “Our plan is before the decade is out for the Greek debt-to-GDP ratio to be below 120%". The Government wants to be "quite aggressive in terms of debt reduction". Fitch noted on Monday that it continues to expect Greece to run headline surpluses, with the government having "maintained a strong commitment to fiscal prudence".
- On the activity side, the government expects GDP to grow 2.4% next year. That's above the current Bloomberg consensus of 2.0%. In May, Fitch said that it expects Greek growth above 2% in 2026. As such, the near-term cyclical outlook appears resilient. However, medium-term risks stemming from weak potential output (e.g. due to a structurally low household savings rate and low labour participation) and the eventual removal of NGEU disbursement tailwinds remain present, and will need to be addressed in the coming years. We don't think these risks are material enough to prevent an upgrade though.
- The 10-year GGB/Bund spread is currently at its narrowest since before the GFC at 63.5bps. A simple yield/ratings chart suggests GGBs have already incorporated the likelihood of future upgrades. Speaking to the MNI Policy Team last week, a Greek Treasury source said that the next surge in [GGB] demand could come in one or two years’ time, and include Asian investors, “when we will be at BBB+ levels or close to BBB+”.
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US DATA: Empire Starts Oct Manufacturing Data On Solid Note (And Firm Prices)
Oct-15 12:51
The NY Fed's Empire State Manufacturing Survey handily beat expectations with a headline General Business Conditions reading of 10.7 in October (-1.8 expected, -8.7 prior), starting the month's regional Fed manufacturing readings on a strong note (albeit accompanied by higher inflation pressures).
- This was the 2nd highest reading since November 2024 and came after an unexpected pullback in September to a 3-month low. It brings the overall reading back into typical mild expansionary territory (5-year lookback z-score of 0.7).
- The subindices were also solid: New Orders to 3.7 after -19.6 prior, Employment to a 3-month high 6.2 after -1.2 prior, and Shipments to 14.4 after -17.3. And there was optimism evident in the 6-month outlook of 30.3, up from 14.8 prior for a 9-month high, with forward-looking expectations for New Orders and Shipments markedly higher.
- Along with the better activity however came stronger price pressures: current prices paid rebounded to 52.4 from 46.1 prior (which had been a 7-month low), with expected prices paid 6-months ahead rising to 65.0 from 57.8 for a fresh 5-month high.
- Notably, current prices received jumped to 27.2 from 21.6 for a 6-month high, suggestive of manufacturers passing along input price increases (6-month-ahead prices received ticked up 0.6 points to 43.7 also for a 6-month high, suggesting those increases are expected to be sustained).
US SWAPS: Long End Spreads Continue To Lead Widening After Powell's QT Comments
Oct-15 12:46
Long end swap spreads continue to lead the move as yesterday’s widening is extended on.
- A reminder that comments from Fed Chair Powell, pointing to potential end to QT in the coming months, drove Tuesday’s widening.
- 5- & 10-Year swap spreads move to fresh multi-month highs but still trade below pre-Liberation Day levels that prevailed in early April.
- Meanwhile, 30-Year spreads trade close to their March closing high (-73.5bp).
- J.P.Morgan recommended unwinding 3-year swap spread wideners following the comments from Fed Chair Powell.
- They noted that “term funding premium is now below our estimate of fair value. We turn neutral on swap spreads”.
US: MNI POLITICAL RISK - Thune Signals Change In Shutdown Strategy
Oct-15 12:31
Download Full Report Here
- President Donald Trump will hold a press conference with FBI Director Kash Patel at 15:00 ET 20:00 BST and host a “Ballroom Dinner,” at 19:30 ET 00:30 BST
- At 14:15 ET 19:15 BST, the Senate will vote a ninth time on the House-passed government funding bill. Senate Majority Leader John Thune (R-SD) is deploying a new strategy to ramp-up pressure on Democrats. US troops will receive paychecks today, but funds are unlikely to extend to the next military payday on October 31.
- Fed Chair Jerome Powell warned labour market risks are a more immediate concern than tariff-driven inflation.
- JPMorgan Chase's investment strategy reflects the private sector's endorsement of Trump's agenda.
- Trump suggested the US could halt purchases of Chinese cooking oil in retaliation for Beijing’s withdrawal from US soybean exports.
- Trump threatened Spain with tariffs for failing to hit NATO spending targets.
- Trump’s upcoming National Security Strategy is expected to focus on the Western Hemisphere.
- NATO defence ministers meet today in Brussels amid speculation that Trump could sell Tomahawk missiles to Ukraine.
- Trump warned the US could disarm Hamas "violently" as the Gaza peace plan faces its first significant test.
- Trump said an economic assistance package for Argentina is contingent on President Javier Milei 'winning' Oct. 26 legislative elections.
- The US military killed another six alleged drug traffickers off the coast of Venezuela.
- Poll of the Day: US voters “resoundingly” support Trump’s Gaza peace plan.
Full Article: US DAILY BRIEF
