EUROPEAN FISCAL: German Tax Estimates Lowered But Little Impact On 2027 Gap
May-07 16:06
New bi-annual German tax estimates were revised 0.7% lower through 2030 on a general government level (-E87.5bln), led by a 2.1% downward revision on a central government level (-E52.3bln) when compared to the October 2025 estimates. Further details from the accompanying press conference:
- The deterioration in the estimated tax take comes in 2026 with the forecast then maintaining this level step lower compared to prior forecasts across the horizon.
- However, with a large part of this near-term deterioration already anticipated, the consolidation pressure / funding gap for the 2027 budget increased by around E1bln. That follows the budget "key figures" from last week (1,2) which met debt brake limits and means the resulting gap should pose no material problem for the government to be filled. On July 6, the draft 2027 budget is planned to be approved by the cabinet, likely closely matching the mentioned "key figures" which should help it pass in the Bundestag.
- Tax reforms: Klingbeil repeats the government is planning to give relief to small and middle incomes (for context, the German tax system is considered less progressive than for example the British one, with the levy burden raising quickly also for smaller incomes in percentage terms). The Finance Ministry will propose its draft in the coming weeks (which will then need CDU/CSU approval). For counter financing measures, tax increases for high earners continue to be discussed but are excluded so far by Chancellor Merz. Klingbeil kept his options open in the press conference on this but somewhat renounced the idea of higher VAT or wealth taxes.
- On debt brake limits: "We are observing the Iran war impact on Germany closely. It remains what we've said earlier: Calling an emergency situation (this would exempt 2026 from debt brake limits) etc is currently not planned." Figures on how much the lower tax estimates will impact the debt brake business cycle adjustment (as debt limits are controlled for cyclic fluctuations) will be known in October.
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US TSYS/SUPPLY: Preview 3Y Note Auction
Apr-07 16:05
Tsy futures remain weaker but off morning lows ahead of the $58B 3Y note auction (91282CQJ3) at 1300ET, WI is currently at 3.892%, 31.3bp cheap to last month's tail. Results will be available shortly after the competitive auctions closes at 1300ET.
- The March 3Y Note auction brought a rare tail: 1.1bp with a 3.579% high yield vs 3.568% when-issued. Not only is this the first 3Y tail after six consecutive auction trade-throughs, it is the largest tail since April 2025's 3Y sale (2.4bp, also a time of geopolitical turmoil, the White House's tariff "Liberation Day").
- Peripheral stats were soft. Dealers took down 19.5% of competitives, the highest since April 2025; directs took 20.7% (5-auction avg 26.9%) with indirects 59.8% (5-auction avg 62.3%).
- Bid-to-cover of 2.55x was the lowest since the last time we saw a 3Y auction tail, in August 2025.
- Short-end yields ticked up 0.8-0.9bp after the surprise tail but swiftly recovered as oil prices extended to session lows.
| High yield | When-issued yield | Trade through (tail) | High - Median Spread | Bid-to-cover | Primary Dealer Percent | Indirect Percent | Direct Percent | Offering Amount | |
| 5 auction avg | 3.579% | 3.581% | 0.18 | 4.68 | 2.66 | 12.63% | 61.67% | 25.68% | $58B |
| 10-Mar-26 | 3.579% | 3.568% | (1.1) | 5.2 | 2.55 | 19.50% | 59.80% | 20.70% | $58B |
| 10-Feb-26 | 3.518% | 3.519% | 0.1 | 5.0 | 2.62 | 10.94% | 57.15% | 31.92% | $58B |
| 12-Jan-26 | 3.609% | 3.610% | 0.1 | 4.9 | 2.65 | 14.00% | 56.50% | 29.50% | $58B |
| 8-Dec-25 | 3.614% | 3.622% | 0.8 | 4.4 | 2.64 | 9.03% | 71.97% | 19.00% | $58B |
| 10-Nov-25 | 3.579% | 3.589% | 1.0 | 3.9 | 2.85 | 9.72% | 62.96% | 27.32% | $58B |
FED: US TSY TO SELL $80.000 BLN 4W BILL APR 09, SETTLE APR 14
Apr-07 16:05
- US TSY TO SELL $80.000 BLN 4W BILL APR 09, SETTLE APR 14
FED: US TSY TO SELL $75.000 BLN 8W BILL APR 09, SETTLE APR 14
Apr-07 16:05
- US TSY TO SELL $75.000 BLN 8W BILL APR 09, SETTLE APR 14
