POLITICAL RISK: Main Political Speakers On Second Day Of WEF @ Davos

Gilts look to Bunds for early cues, initially selling off at the open, before a recovery.

• Futures -19 at 90.75 after basing at 90.65.
• Support and resistance of note located at 90.50 & 91.93, respectively. Post-BoE price action tilts focus back towards support.
• Yields 0.5bp lower to 1bp higher, curve twist steepens.
• Month-to-date highs intact/untested across the curve.
• Gilt/Bund spread sticks to the recent range after last week’s failed break below 160bp, last +1bp at 163.6bp.
• 2s10s less than 2bp off the November closing high (79.52bp), last 78.23bp.
• Final Q3 UK GDP data met expectations, with total business investment firmer than expected. Meanwhile, the Q3 current account deficit was narrower than expected.
• Elsewhere, a survey from jobs website Adzuna pointed to scaled back hiring ahead of the Budget, which isn’t a surprise.
• SONIA futures roughly in line with pre-gilt open levels, BoE-dated OIS pricing ~38bp of easing for ’26.
• Looking ahead, only lower tier UK data is due ahead if the Christmas break, with the Lloyds Business Barometer set to cross just after midnight

RXG6 126.00p, bought for 28.5 and 29 in 3.25k.

German households will see mixed effects at best on take-home pay in 2026 vs '25 when considering net changes in taxes, social contributions, and benefits, data provider Datev calculates in newspaper SZ. On balance, legislative changes will be eating into real wage gains of employees. 

• This comes against the backdrop of the German consumer climate remaining well in negative territory, with GfK noting that "while economic expectations are stagnating, both income expectations and willingness to buy are declining".
• Effects range from roughly +0.1% to -0.5%, with the impact generally more negative for higher earners.
• These are calculated out of gross income - so % out of previous take-home pay would be significantly larger, especially for high earners given progressive taxes.

• Legislative changes on year-end include in particular higher tax bracket thresholds but also higher statutory healthcare payments.