EUROPEAN FISCAL: Further Budget Details From German Finance Ministry
Further from the German finance ministry (full press release here, key figures here), including that there currently isn't a plan for a debt brake suspension on the back of the Iran war although the situation is being monitored.
- As reported yesterday, net borrowing incl. special funds rises to E196.5bln in 2027, this was seen at around E170.7bln in last July's estimates. In the core budget, net borrowing is now planned at E110.8bln (from E88.1bln).
- "We are not currently planning a debt brake suspension" on the back of the Iran war, but they "are monitoring the situation" (a debt brake suspension on the back of a temporary "emergency situation" is a temporary measure to allow for higher net borrowing which does not warrant a constitutional amendment of debt rules)
- The 2028 financing gap has been reduced from E64bln to around E30bln (this is a gap between current estimates for allowed net borrowing vs current estimates of revenues and expenditure)
- Planned government 'investments' for 2027 now stand at E118.5bln, similar to the E117.4bln planned as of last July.
- Reiterating income tax reform: "The German government will also introduce an income tax reform this year that will provide relief for low and middle-income earners. It will come into effect on January 1, 2027. The Federal Ministry of Finance will present a draft bill for this shortly." - note that key CDU / CSU figures have recently pared prior pushback against higher taxes for top earners to finance this.
- Next up in German fiscal are updated tax estimates, scheduled for release early May. Recent growth forecast downward revisions will put downside pressure here but tax code changes will also interfere.
- Elsewhere, there seems to be scope for the government following up on healthcare reforms as SPD seconds CDU's bid to reduce the amount of public health care providers from 93 to around 20 according to a Bild report.
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US TSYS: BLOCK: Jun'26 2Y Buy
- +5,500 TUM6 103-19.38, post time offer at 0759:54ET, DV01 $212,850.
- The 2Y contract trades 103-19.62 last (+3).
US TSYS: Early SOFR/Treasury Options Roundup: Rate Hike Pricing Retreat
SOFR options leaning toward downside puts overnight, Treasury options more paired on lighter volumes. Underlying futures well bid but off recent knee-jerk highs after latest Trump TSL post the US "is in serious discussions with A NEW, AND MORE REASONABLE, REGIME to end our Military Operations in Iran." Rates scale back half the move as Trump follows up with renewed threat to attack Iran if Hormuz straight not re-opened. Projected rate moves/hike pricing retreating vs. late Friday lvls (*): Apr'26 at 0.5bp (+1bp), Jun'26 at +1.4bp (+2.1bp), Jul'26 at +0.8bp (+2.5bp), Sep'26 at +2.9bp (+5.8bp), Oct'26 +3.5bp (+7.3bp).
- SOFR Options:
- 4,800 SFRK6 96.00 puts, 2.5
- 4,600 SFRJ6 96.12 puts, 1.5 ref 96.305
- 3,000 SFRZ6 95.50/96.00 put spds ref 96.28
- 3,700 SFRM6 96.31/96.37 put spds
- Block, 2,500 0QM6 97.00 calls, 7.0 vs. 96.36
- 10,000 0QN6 95.12/95.37 put spds ref 96.45
- 2,000 SFRZ6 96.00/96.25 put spd vs. 96.25/96.50 call spd ref 96.255
- 4,100 SFRJ6 96.12/96.25 put spds ref 96.30
- 3,500 0QM6 97.00 calls, 7 ref 96.37
- Treasury Options
- 2,250 wk2 FV 108.25/109.25/109.75 broken call flys ref 107-25 (exp 4/10)
- 5,500 TUK6 103.12/103.5 2x1 put spds ref 103-18.25
- 12,000 TYM6 111.5/114 call spds
- 3,000 TUK6 103.12 puts ref 103-19
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