CZK: Koruna Extends Losses, CNB Minutes Under Microscope

Reeves 

• Reeves has been asked extensively on what changed between the final pre-measures forecast from the OBR and 14th November when there was the briefing that the fiscal numbers were not as bad as expected.
• She said that the Treasury were not using the GBP4.2bln surplus from the OBR because policy decisions between the Spring Statement and Autumn Budget btrough headroom down to around a GBP3bln deficit. She also says that the GBP4.2bln was "not the last word from the OBR."
• She says the extension of the freezes of income tax and NICs is "not a breach of the manifesto, but is asking everybody to contribute more."
• When asked if the decision not to increase income tax rates was made by her or the Prime Minister, she said that "The prime minister and I met two three times a week during the budget process... we took him through all of these, all of the numbers and all of the options, and we decided it together as a team, because that is what the Prime Minister and I am."
• She was then asked if she could rule out capital gains on primary residencies in this parliament and whether she would rule out changing the "triple lock" pension to "single lock". "Can you rule those out? Please?" "Yes," she replied.

• EUR/USD: Dec11 $1.1595-00(E3.2bln), $1.1610(E3.6bln), $1.1800(E1.7bln); Dec12 $1.1550(E1.3bln); Dec15 $1.1600(E2.2bln)
• USD/JPY: Dec11 Y154.95-00($1.1bln), Y156.00($2.2bln); Dec12 Y155.00($1.0bln); Dec15 Y156.50($1.1bln)
• GBP/USD: Dec12 $1.3240-55(Gbp1.1bln)
• AUD/USD: Dec11 $0.6550(A$1.6bln)
• USD/CAD: Dec12 C$1.3780-00($1.6bln)

Bund futures have moved away from session lows but bearish momentum remains dominant and volumes are elevated. Bunds are -31 ticks at 127.22, having fallen sharply to 127.05 this morning. Round number support at 127.00 is untested for now.

• Front-end repricing remains the key driver, with ECB-dated OIS now longer pricing any implied probability of a cut next year, with 11.5bps of hikes now priced through December 2026. That’s despite some pushback against the idea of hikes from ECB’s Villeroy and Simkus this morning.
• The German curve is bear flatter again, with 5-year yields up over 4bps and 30-year yields up 2bps. That sees 5s30s flatten 96.7bps, the lowest since the end of October. We note that flattening impulses at the long-end may represent an unwind of Dutch pension fund transition-related positions.
• 10-year Bund yields are up 3bps to 2.88%, with the 2.90% figure presenting an important topside level to watch.
• 10-year EGB spreads to Bunds are up to 2bps wider, with BTPs and OATs underperforming. Continued increases in EUR rates vol may be filtering into spreads. OAT price action comes despite the National Assembly passing the 2026 Social Security budget yesterday.
• Italian October IP was weaker-than-expected at -1.0% M/M (vs 0.2% cons).
• This afternoon’s focus is the BOC and Fed decisions.