EUROPEAN FISCAL: French Budget Consolidation Progressing
The French core state YTD budget deficit was E47.0bln in March, up from E40.3bln in February but below the level seen in March 2024 (E52.8bln) and March 2023 (E54.7bln). As such, a gradual consolidation of public finances appears intact.
- The improvement relative to March 2024 was driven by higher YTD revenues (E77.6bln vs E72.6bln a year ago). From the press release: “This is mainly explained by the growth in other domestic taxes (+€2.2 billion) linked to the end of the tariff shield following the normalization of energy prices, net corporate tax (+€1.7 billion) as well as net income tax (+€0.2 billion)”.
- Meanwhile, YTD expenditures were steady at E112.8bln: “This stabilization of expenditure reflects certain decreases observed in disbursements of discretionary schemes (including “MaPrimeRénov”, aid for the acquisition of vehicles, activity bonus, closure of the " gas and electricity " emergency aid scheme ), fully offset by increases in expenditure, particularly on ministries of the Armed Forces and Labor”.
- The special accounts deficit (which largely represents advances to local authorities) was E11.8bln.
- On April 13, Finance Minister Lombard noted that France still needs to find E40bln of savings to meet its 4.6% 2026 budget deficit target, while expressing a preference to make the current tax on high-earners permanent.
- Meanwhile, on April 30 Budget Minister Montchalin said that France is pushing to impose levies on small packages from Chinese exporters.
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STIR: Mix Of Short Cover & Long Setting Seen In SOFR Futures On Tuesday
OI data points to net short cover dominating in the very front of the SOFR futures strip on Tuesday, before net long setting became more prominent further out.
| 01-Apr-25 | 31-Mar-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRH5 | 1,156,697 | 1,184,944 | -28,247 | Whites | -67,069 |
SFRM5 | 1,288,145 | 1,339,157 | -51,012 | Reds | +4,172 |
SFRU5 | 955,068 | 933,926 | +21,142 | Greens | +54,739 |
SFRZ5 | 1,075,144 | 1,084,096 | -8,952 | Blues | +10,814 |
SFRH6 | 646,380 | 650,168 | -3,788 |
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SFRM6 | 689,069 | 690,662 | -1,593 |
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SFRU6 | 629,802 | 628,856 | +946 |
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SFRZ6 | 788,730 | 780,123 | +8,607 |
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SFRH7 | 517,426 | 491,451 | +25,975 |
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SFRM7 | 486,031 | 470,791 | +15,240 |
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SFRU7 | 323,669 | 314,033 | +9,636 |
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SFRZ7 | 431,241 | 427,353 | +3,888 |
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SFRH8 | 229,707 | 230,364 | -657 |
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SFRM8 | 191,929 | 191,123 | +806 |
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SFRU8 | 134,761 | 128,687 | +6,074 |
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SFRZ8 | 140,445 | 135,854 | +4,591 |
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OUTLOOK: Price Signal Summary - USDJPY Resistance Remains Intact
- In FX, a bullish theme in EURUSD remains intact and recent weakness appears corrective. Moving average studies are in a bull-mode position highlighting a dominant uptrend. Key near-term support lies at 1.0733, the Mar 27 low. A move through it would confirm a clear breach of the 20-day EMA and signal scope for a deeper correction towards the 50-day EMA at 1.0661. Key resistance and the bull trigger is 1.0955, the Mar 18 high.
- GBPUSD is in consolidation mode and trading in a range. Importantly for bulls, the pair continues to trade closer to its recent highs. MA studies are in a bull-mode position highlighting a dominant uptrend. A breach of 1.3015, the Mar 20 high and bull trigger, would resume the uptrend and open 1.3048, the Nov 6 2024 high. Support at the 20-day EMA, at 1.2891, is intact. A clear break of the 20-day EMA is required to signal scope for a deeper correction.
- Near-term resistance in USDJPY remains intact. The primary trend direction is unchanged, it remains down and the latest recovery is considered corrective. Key resistance is unchanged, around the 50-day EMA, at 150.82. A clear break of this EMA would undermine the bearish theme and signal scope for a stronger rally towards 152.70, a 50.0% retracement of the Jan 10 - Mar 11 bear leg. The first key support to watch is 148.18, the Mar 20 low. A breach would be bearish.
BONDS: Core and Semi Core Bonds are extending higher
- Further upside continuation in Core and semi core Govies on both side of the Pond, early flows in the German Bund has been some positioning ahead of the Tariffs announcement.
- As mentioned on the Bund open, Invertors will look for Upside risks in futures very short term, given the Global growth concerns, but the latest set of Data could point towards Stagflation.
- German 10yr Yield sees the 2.65% level close to that 129.54/129.60 resistance area, Today that level is at 129.63.
- For TYM5, while the March high is at 112.01, the March and the 2025 low in the 10yr Yield of 4.1040%, would equate today to 112.03+.
