US: House Freedom Caucus Complicates Republican Reconciliation Agenda
The conservative House Freedom Caucus has outlined their preferred strategy for legislating the 2025 Republican agenda, pushing against House Speaker Mike Johnson’s (R-LA) plan to include the bulk of the agenda in one huge reconciliation bill. The group’s plan also rejects Johnson’s preferred option of addressing the debt limit in a standalone bipartisan bill. The HFC position will add further uncertainty to Johnson's ambitious mid-April timeline for a House vote on a reconciliation package.
- According to a HFC statement, their proposal calls for an initial bill to reverse Biden administration policies, fund border security, and raise the debt ceiling for two years; to be followed later in the year with a second reconciliation bill addressing tax cuts.
- The Freedom Caucus said. “Our proposal is a Republican plan that we believe can reach 218 votes, that would also allow us to keep the ball on the Republican side of the negotiating field for defense and non-defense appropriations — while delivering wins and uniting the conference.”
- Politico notes: “Johnson needs the Freedom Caucus, which includes more than 30 members, to pass any partisan legislation through the House. Official positions like this proposal have to have the backing of at least 80 percent of the caucus. Plus, some conservatives in the group have signaled they might try to oust Johnson if he compromises too much with Democrats.”
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BONDS: Off Lows, Cross-Market Cues & Technicals Eyed
Some pre-U.S. cash equity open weakness in e-minis, as well as a hold of technical support in Bunds and intraday lows in gilts, allowed core global FI markets to recover from session lows.
- Tsys outperform, narrowing by 2.5bp to Bunds, while the gilt/Bund 10-Year spread is on track to close above 230bp, which would represent a fresh multi-decade high.
- Macro headline flow limited, leaving cross-market cues and technicals at the fore ahead of today’s major risk event, the final FOMC decision of ’24.
- With markets essentially fully discounting a 25bp rate cut, focus should quickly turn to the post decision communique (assuming a cut is delivered).
- The ’25 dot in the SEP will be eyed in the first instance.
- We believe that the dot plot will show 75bp of cuts in 2025 - 25bp less than the 100bp seen in the last edition - with 2026, 2027 and the Longer-Run dot also in line for increases.
- Click for our full preview.
US: SFR Call Condor
SFRF5 95.87/95.93/96.00/96.06c condor, bought for 1 in 2k.
SCANDIS: O/N NOKSEK Vols Elevated Ahead of Scandi Decisions Tomorrow
Overnight NOKSEK vols have topped 10 points as tomorrow’s Riksbank and Norges Bank decisions come into view, the highest level since August and above the 7.2 YTD average. Although the rate decisions (25bp Riksbank cut and Norges Bank hold) are widely expected, focus will be on the updated rate path projections and guidance around the outlook for policy rates next year.
- That helps explain the 1-point O/N vol premium compared to the November decisions (which were also on the same day, but did not feature new projections).
- Overall, we view the risks to both decisions as slightly tilted in a hawkish direction, but the proximity of the events (Riksbank at 0830GMT and Norges at 0900GMT) still leaves scope for volatility in NOKSEK.
- An overnight ATM NOKSEK straddle requires a ~40 pip swing from current levels to break-even. On the downside, this would bring yesterday’s low at 0.9732 into view, clearance of which would strengthen a developing bearish threat in the cross. Initial resistance is the 50-day EMA at 0.9810.
- Our Riksbank preview is here and our Norges Bank preview is here
