US: House Budget Committee Advances Resolution, Clears First Procedural Hurdle
Feb-14 08:53
The House Budget Committee advanced a budget resolution yesterday, clearing the first procedural hurdle towards legislating President Donald Trump’s agenda.
- House Budget Committee Chair Jodey Arrington (R-TX) said in remarks ahead of the vote: “This budget resolution provides the fiscal framework for what will be one of the most consequential pieces of legislation in modern history...”
- The resolution sets out a $1.5 trillion floor for spending cuts, with a target of $2 trillion; allows $4.5 trillion for tax cuts; raises the debt limit by $4 trillion; and hikes defence spending by $300 billion.
- The committee vote, the first major win over deficit hawks for House Speaker Mike Johnson (R-LA), came after the panel adopted an amendment to include the Regulations from the Executive in Need of Scrutiny Act (REINS) Act in the final reconciliation bill.
- Politico notes the “REINS Act” would “require Congress to approve all major rules... conservatives have long seen it as a way to cut the bureaucracy’s power [but] some lawmakers wonder whether it meets the criteria for budget reconciliation.”
- When lawmakers return from recess on the week of Feb 24, Johnson must pass the resolution on the House floor, where he can likely drop only one GOP vote. If the resolution passes, it will be incumbent on the Senate to take up the resolution. When an identical resolution is passed by both chambers, work can begin on the text of a reconciliation package.
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EUROPEAN FISCAL: French Budget Deficit Widens In-Line With Seasonal Norms
Jan-15 08:49
The French YTD general government budget deficit widened to E172.5bln in November. The November YTD deficit stands at 105.7% of the 2024 forecast deficit by the French Ministry of Finance (vs 114% in Jan-Nov of 2023's outturn).
- Note that November usually marks the low point of the year with the month of December usually seeing a surplus. The forecast for the whole year of 2024 is E163.2bln, and this print is a notably smaller deficit than the Jan-Nov 2023 period (E198.0bln).
- The balance of special accounts' deteriorated to -E22.5bln (vs -10.3bln in October 2024, and -E21.9bln in November 2023), leaving the current YTD balance more than 4 times where it is forecast to stand between Jan-Dec 2024 (at -E5.6bln), though this is in line with seasonal trends, with the account usually improving in December.
- YTD revenue rose to E312.0bln in November 2024 vs E297.1bln in Jan-Nov 2023, taking the YTD receipts to 90% of forecast (compared to 84% in Nov 2023).
- This is driven largely by a timing, rather than a fundamental issue. Non-tax revenues remain significantly above 2023 YTD levels recording E19.7bln in November and 83% of 2024 total forecast (vs E10.9bln in Jan-Nov 2023 and 44% of 2023 total). This is because of an EU RRF payment was received earlier in the year compared to 2023 (June rather than December).
- Tax revenues YTD are marginally above Jan-Nov 2023 receipts at E285.4bln (88% of 2024 forecast; vs E280.0bln in Nov 2023 and 87% of 2023 total).
- YTD total expenditure was E462.1bln (vs E473.2bln YTD in November 2023), this represents 91% of the 2024 total expenditure forecast forecast, broadly in line with where it stood in November last year (90% of total).
EGBS: /SWAPS: Commerzbank Remain Short Long End German & French ASWs
Jan-15 08:39
Commerzbank note that “repo specialness continues to erode out of year-end, but exclusively due to the rich, seasoned Bunds. Recent issues and GC remain floored around depo, suggesting that the collateral floor continues to hold.”
- “Swap spreads stay tense as the renewed pressure on (ultra-)longs offsets the collateral-driven resilience in Schatz-spreads. As fiscal fears continue to dominate, U.S. Tsy and Gilt spread-structures signal further downside even if the collateral floor remains in place. We therefore stay short (ultra-)long Bund ASW spreads outright and vs. the curve, as well as 30y OAT spreads.”
- “As the specialness differential between seasoned, low-free-float Bunds and high-free-float ones continues to compress we see value in switching out of seasoned, rich DBRs into the active peers. EGB-spreads should continue to consolidate as fiscal fears stays in focus.”
EUROPEAN INFLATION: French CPI Inflation Momentum Rebounded In December
Jan-15 08:38
French final December HICP inflation was unrevised from the flash print on a rounded basis at 1.8% Y/Y (vs 1.68% in November) and 0.2% M/M (vs -0.15% prior). On a unrounded basis HICP inflation was 1.75% Y/Y, 1 hundredth softer than the flash reading. CPI inflation was also unrevised from flash at 1.3%. On an unrounded basis, CPI was 3 hundredths softer than the flash estimate at 1.32% Y/Y.
- Core CPI softened to 1.3% Y/Y (from 1.5% in November).
- Services was revised down 1 tenth from flash to 2.2% Y/Y (2.3% in Nov) while core services also softened to 2.6% (vs 2.8% in Nov - there is no flash for this series). The slowdown in services was in part due to prices of communication services falling 14.7% (vs -12.2% prior).
- The broad "manufactured products" component was unrevised from the flash print at -0.4% Y/Y (vs -0.3% prior). Core manufactured products fell at a steeper rate 0.4% Y/Y (from -0.2% in Nov).
- The softening in services and manufactured products is offset by energy rebounding between November and December; it was unrevised from flash at 1.2% Y/Y (vs -0.7% in Nov).
- INSEE's seasonally adjusted CPI series highlights momentum rebounding after having eased for the previous few months. CPI rose 0.4% M/M seasonally adjusted (SA), after a flat reading in November. The 3m/3m SA annualised rate rose 0.18% in December (vs a fall of 0.71 in Nov), and the 3m annualised rate rose a solid 2.63% (from -1.45% in November) - the firmest since August 2024.
- There was a marginal decrease in the proportion of subcomponents with annual inflation rates above 2% in December (34% vs 35% prior), with the proportion of components with annual inflation rates above 6% also falling marginally to 10% from 11% in November.
