US: Inability To Reform ACA Could Prolong Gov Shutdown, Awaiting News On CR Vote
Nov-07 15:55
Burgess Everett at Semafor notes a technical issue surrounding Affordable Care Act premium enhanced tax credits, which could impact a potential deal to reopen the US government: "One interesting thing I've heard from people in both parties is that the ACA subsidies probably could only get a straight extension for 2026, any changes (income cap etc.) would come for 2027. That's because the insurance markets are already open," Everett wrote on X.
- If ACA reforms can't be included - most notably an income cap - in a bipartisan deal to reopen the government, House Speaker Mike Johnson (R-LA) may have a difficult time getting a negotiated deal through the House. This is especially salient if House Republicans see a strong chance of losing the House at the 2026 midterms, as this Congressional period may be the final chance to reform the ACA credits.
- Since the government closed on October 1, Democrats have opened up a +4 lead on the generic Congressional ballot, per RealClearPolitics. While that is a tighter lead than during Trump's first term, it is consistent with a loss of the House. Polymarket gives Democrats a 70% implied probability of flipping the House.
- It is unclear if Senate Majority Leader John Thune (R-SD) will hold a 15th vote on the House-passed funding measure when the Senate convenes in just over an hour. If the vote goes ahead, we expect it to fail again. Punchbowl notes that the details of an appropriations package as part of a deal, including the end-date of a new CR and three-bill minibus, are yet to finalised.
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EUROPEAN FISCAL: German Government GDP Revisions Likely To Lower Financing Gap
Oct-08 15:36
- Today's upward revisions of the German government's GDP estimates will likely have a net reductive impact on the current E172.3bln financing gap in the federal fiscal plan through 2029 relative to the estimates using the previous GDP assumptions.
- The new GDP forecast (0.2% 2025, 1.3% 2026, 1.4% 2027) will first flow into updated tax estimates scheduled for publication on October 23, and should, on balance, result in higher estimates for taxes including VAT, corporation tax, and income tax. Note that new legislation approved since the last estimates (includes the "growth booster" legislation package as well as the restaurant VAT decrease starting Jan 2026) will mechanically act counter to today's GDP impact.
- These tax estimates will subsequently be used in the finance ministry's financial plans / budget calculations.
FED: US TSY 17W BILL AUCTION: HIGH 3.775%(ALLOT 33.62%)
Oct-08 15:32
- US TSY 17W BILL AUCTION: HIGH 3.775%(ALLOT 33.62%)
- US TSY 17W BILL AUCTION: DEALERS TAKE 24.91% OF COMPETITIVES
- US TSY 17W BILL AUCTION: DIRECTS TAKE 3.70% OF COMPETITIVES
- US TSY 17W BILL AUCTION: INDIRECTS TAKE 71.39% OF COMPETITIVES
- US TSY 17W BILL AUCTION: BID/CVR 3.28
FED: Any Balance Sheet/Admin Rates Discussion Eyed, Analysts Mixed On Tone (3/3)
Oct-08 15:32
In more of a curiosity, we will be intrigued by how Miran's last-minute introduction to the Committee translates into the description of the proceedings. In particular it will be no surprise given his dissent and “dot” for 150bp of cuts this year if there is “a” participant that argues vociferously for aggressive front-loaded cuts.
- We'll be looking for any discussion about balance sheet policy. The meeting preceded September’s quarter/month-end pressures and drawdown of reserves below the $3T mark, and it may soon be time for the Committee to make decisions about how it will handle the transition from abundant to ample reserves. (We note also that the NY Fed’s latest survey of market participants should be out today, offering the latest consensus take on when QT will end and at what size of Fed balance sheet.)
- Additionally, Dallas Fed President Logan’s comments on the Fed selecting a new policy target rate (she eyes TGCR) to replace the Fed funds rate raise the question of whether the FOMC discussed more technical operational aspects at this meeting.
Some sell-side analysts’ identified areas to watch:
- BMO: “will be of particular relevance as it relates to the Fed's recent shift toward outweighing the employment aspect of its mandate over inflation. The benchmark revisions and lackluster payroll gains this summer were an inflection point for the Fed and investors. After all, the loss of the ‘labor market is resilient’ mantra has ushered in a re-think of how restrictive policy has been and, therefore, how quickly the Fed should seek to return to neutral. As September was Miran’s first FOMC meeting, the market will be watching the Minutes for any response on the Committee to his decidedly more dovish stance, even if the tone of the official communication will surely err on the side of diplomatic.”
- BofA: “we will be looking to understand why the Fed projected deeper cuts than in June despite moving to more hawkish macro forecasts.”
- Deutsche: “Though we have heard the majority of Fed officials since the meeting, the minutes could nonetheless shed some further light on the wide rift amongst officials with respect to the policy outlook… Aside from views on the current policy outlook in the minutes, we will also focus on potential staff presentations related to the Fed’s policy implementation framework.
- ING: “What we’ll be looking for in the minutes is evidence that Chair Jerome Powell’s cautious view on further cuts is shared by the majority of the FOMC. The risks appear slightly tilted to the dovish side and therefore to a negative USD reaction to the minutes.”
- Natixis: “The debate was likely lively given the vastly different economic forecasts and disperse views on the Fed’s appropriate reaction function to ongoing economic developments.”
- TD: “likely to highlight the division on the Committee between the hawks and doves. Most participants likely saw the policy recalibration as necessary. However, we expect some participants saw further easing this year as unlikely given tariff-driven inflation risks. Many participants likely anticipate further easing owing to labor market risks.”
