US TSY FUTURES: Long Setting Seen Across The Curve On Wednesday

• RES 4: 151.62 61.8% retracement of the Jan 10 - Apr 22 bear leg
• RES 3: 150.92 High Aug 1 and a key resistance 
• RES 2: 149.81 76.4% retracement of the Aug 1 - 14 bear leg 
• RES 1: 148.79/149.12 Intraday high / 61.8% of Aug 1 - 14 bear leg  
• PRICE: 148.51 @ 10:43 BST Sep 2
• SUP 1: 146.21 Low Aug 14 and bear trigger
• SUP 2: 145.86 Low Jul 24
• SUP 3: 145.40 50% retracement of the Apr - Aug upleg
• SUP 4: 145.19 Trendline drawn from the Apr 22 low 

USDJPY is trading higher today but for now, remains inside its range. Resistance to watch is 148.78, the Aug 22 high. It has been pierced, a clear break of it would highlight a range breakout and a stronger bullish theme. This would also undermine the recent bear threat. A breach would open 149.12, a Fibonacci retracement. The bear trigger lies at 146.21, Aug 14 low. Clearance of this level would resume a downtrend that started in  August.

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The French core state budget deficit returned to more favourable ytd tracking compared to 2024, primarily on higher revenues. The E142bn ytd deficit is already worth ~4.8% of annual GDP but with the bulk of the year's cumulative deficit likely already seen owing to the seasonal profile. As always though, take care translating this into the general government basis used for the 2025 deficit target of 5.4% GDP. 

• The French core state year-to-date budget deficit widened to E142bn in July (vs E100.4bn June), an improvement of E14.9bn relative to E156.9bn in July 2024.
• It sees a return of more favourable tracking relative to a year ago after June’s E3bn limited improvement was helped by 2024 base effects from a shifting in EU RRF payments and also a temporarily smaller deficit in special accounts.
• Expenditures (BG + PSR) are E3.4bn lower ytd than in 2024, with the press release noting that this is “mainly explained by the elimination of Program 369”, the COVID-19 state debt amortisation programme.
• The relative improvement is instead mainly driven by revenues being E11.3bn higher, with the largest single contributor from other tax revenues of which E4.1bn is seen related to the end of the energy tariff shield.
• The 10-year OAT/Bund spread is almost 1.5bp wider today at 80bps, with intraday price action seemingly a function of broader core FI moves rather than any domestic developments. While the spread is off last week's closing extremes of 81.5bps, political/fiscal-related widening pressures remain in focus. A reminder that the spread was hovering around ~70bps prior to PM Bayrou's previous no-confidence vote announcement.
• The new upcoming confidence vote (called last week) takes place on Mon 8 Sept, with the dismissal of the current gov’t looking more likely than not, owing to both the left-wing New Popular Front and the right-wing National Assembly set to vote against the confidence motion.
• FM Lombard last week said France will meet the 2025 deficit target of 5.4% GDP and that he’s confident the 2026 budget deficit will be the proposed 4.6% GDP (both estimates on a broad general government basis rather than core state figures released today).