UK: Labour Rebellion On Welfare Reform Grows
With the gov't facing a major rebellion from backbench Labour MPs on proposed welfare reforms that could save GBP5bln/year by 2030, Pippa Crerar at The Guardian posts on X: "Despite Liz Kendall and other cabinet ministers being locked in talks trying to convince welfare rebels not to vote down the bill, I'm told the number of Labour MPs planning to do so has actually gone up - from 108 to 127."
- As noted earlier (see 'UK: Sizeable Backbench Rebellion Looks To Force Gov't U-Turn On Benefits Cuts', 10:52BST), the gov'ts working majority would be wiped out by the scale of the backbench votes for the amendment (not to say the possibility for ministerial resignations over the issue as well). If the amendment is adopted, it would be enough to see the Bill stopped at the second reading on 1 July.
- This scenario leaves PM Sir Keir Starmer with several options. One is facing down the rebels and risking major splits within the party between leftists and moderates. Another is to row back on the proposed reforms, risking market jitters over his gov'ts commitment to fiscal probity. Another is to rely on votes from the main opposition centre-right Conservatives.
- The Conservatives have not yet indicated their intentions with regard to the amendment, or the welfare reform bill in general. Relying on opposition votes would risk further discord within the governing centre-left Labour party and potentially weaken the positionof Starmer, Chancellor of the Exchequer Rachel Reeves, or Secretary of State for Work and Pensions Liz Kendall.
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JGB TECHS: (M5) Rallies off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.40 @ 15:42 GMT May 23
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows and for now, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US FISCAL: Total Tariff Income Jumping In May As New Rates Hit
Treasury reported a record $16.5B in customs/excise taxes on May 22, reflecting the large increase in tariff rates that went into effect in April.
- Today's report is important because it represents the largest tariff collections of the month which are typically on a due date around the 22nd, when most corporate importers make their payments.
- Thursday's one-day collection is a record, and the month has already set a new record. Tariff revenues have totaled $22.3B so far in May, and are came in at $17.4B in April (after averaging $8.1B/month in 2024).
- For the fiscal year as a whole so far, customs duties have totaled just under $93B, per the Treasury Daily Statement.
US FISCAL: Extraordinary Measures Continue To Dissipate Alongside Treasury Cash
Treasury's latest estimate of the size of "extraordinary measures" available to use "in order to prevent the United States from defaulting on its obligations as Congress deliberate[s] on increasing the debt limit" is down to $67B on May 21 (of an available $299B), vs $82B a week earlier.
- The amount hit the 2nd lowest level since the debt limit impasse started, at $46B, on May 20 (the low was $34B on Feb 24).
- With $476B in cash in the Treasury General Account on May 21, that left the total resources available to Treasury at $543B, the least since April 14 - the day before the annual April 15 tax deadline.
- Treasury Sec Bessent warned Congress earlier this month that "there is a reasonable probability that the federal government's cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess. Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July".
