US: GOP Sweetens Shutdown Offer For Democrats - Politico
Politico reports that Republicans submitted a new offer to Democrats to reopen the federal government. In addition to the existing proposal, which promises a Senate vote on extending Affordable Care Act tax credits and the passage of a three-bill appropriations package, the new offer includes a pledge to “discuss rehiring federal workers who have been laid off during the shutdown.”
- The offer comes ahead of a Senate Democratic caucus meeting, during which progressive members are expected to press a group of centrists to refrain from reopening the government until President Trump endorses an ACA deal, rather than simply promise an uncertain vote.
- Progressive Democrats believe Tuesday’s election results, which saw Democrats overperform in a raft of statewide and local races, signalled that the electorate endorses the party’s shutdown strategy.
- Earlier, House Speaker Mike Johnson (R-LA) declined to promise a corresponding House vote on ACA credits, “I'm not promising everybody, anything. I'm going to let this process play out."
- Johnson’s position is likely to harden Senate Minority Leader Chuck Schumer’s (D-NY) belief that only a deal with President Trump can assure the House will sync with any Senate deal on ACA.
- Trump is due to speak shortly from the Oval Office on an (delayed) unrelated pharma announcement. He is likely to speak broadly on a range of issues, including the government shutdown. A few moments ago, Trump reiterated his request for Senate Republicans to terminate the filibuster, a move which GOP leadership don't believe they have sufficent votes.
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EUROPEAN FISCAL: Stability Council Sees German Govt Debt At 80% GDP In 2029
The fiscal projection of the German "Stability Council" finds that "the Maastricht debt ratio could rise to around 80.25% of GDP by the end of the projection period in 2029" in Germany. This compares with a realised debt ratio of 62.5% of GDP in 2024.
- It is difficult to gain a firm view on current consensus on the German Maastricht debt ratio for the years ahead, but 80%+ seems to be towards the higher end of estimates we've seen previously.
- "The members of the Stability Council agreed that such a dynamic development of debt levels relative to economic performance, if it continued, would jeopardise the long-term sustainability of public finances. In order to counteract such a development, the Stability Council therefore considers consistent consolidation measures at all levels of government, comprehensive structural reforms and the investment- and growth-enhancing use of funds from the Special Fund for Infrastructure and Climate Neutrality to be urgently necessary."
- The Stability Council is a joint body of the German federal government and the states, and is enacted to strengthen "institutional conditions for ensuring long-term sustainable budgets at federal and state level".
In addition, the council notes: "By 2026, the general government deficit ratio could rise to 4¾% of gross domestic product (GDP) before falling again and reaching 3¾% of GDP in 2029. Taking into account the NEC, even with an assumed extension for 2029, the deficit ratio is likely to remain within the maximum permissible level of 3% of GDP, with the exception of 2026 and 2027. Exceeding this level in later years could have a negative impact on compliance with European fiscal rules."
Full press release here (in German).
OPTIONS: Euro Rate Call Condor Buying Continues
Tuesday's Europe rates/bond options flow included:
- DUZ5 107.10/107.00/106.90p Ladder, bought for 1.5 in 7.6k
- ERM6 98.1875/98.25cs 1x1.75 with ERH6 98.00/97.9375ps sold as a strip at 1 in 4k
- ERM6 98.37/98.50/98.75/98.87c condor, bought for 1 in 5k (also bought Monday in 14k)
- ERM6 98.50/98.625/98.750/98.875 call condor, bought for 0.5 in 18k
- 0RH6 98.12/98.37cs, bought for 3.5 in 4k
- 2RZ5 97.6875/97.8125cs vs 3RZ5 97.5625/97.6875cs, bought for 2.75 in 10k
US DATA: Manheim Car Prices A Little Softer, Downside For CPI
- Manheim used vehicle prices were softer than thought earlier in September, now seen to have dipped -0.2% M/M in the full month release vs a 0.05% M/M increase in the mid-month version.
- It follows a flat August, in what are relatively small moves after -0.5% in July, 1.6% in June, -1.4% in May and 2.8% in April.
- Typical lags from recent months suggest downside to CPI used car prices after what was a broadly as expected 1.0% M/M increase back in August (for whenever September might be released) whilst latest Manheim data suggest further weakness beyond that – see charts.
