MNI: US Payrolls Preview: Storms and Strike Uncertainty

OAT futures have pierced round-number resistance at 128.00, exposing the Sep 17 high at 128.14. There has been a step-up in volumes since the top of the hour, as NY participants filter in and assess this morning’s rally.

• PM Barnier is scheduled to address Parliament at 1400BST/1500CET today, and is expected to announce measures to tighten France’s fiscal stance (see the above post for more colour).
• Le Parisien reported yesterday that Barnier will look to announce E15-18bln of additional taxes.
• The 10-year OAT/Bund spread is now 4.5bps tighter today, below 75bps for the first time in two weeks.
• BTP futures have extended higher alongside OATs, now through the 3.00 proj of the Jun 11 - 18 - Jul 1 price swing at 122.22, currently +95 ticks today at 122.42. The BTP/Bund spread has tightened 3bps today to 130bps at typing.
• In EUR STIRs, Euribor futures have registered fresh YTD highs through the reds, greens and blues, likely providing additional support to BTPs and OATs.
• ECB-dated OIS continue to price 22bps of easing through the October meeting, with 151bps of cuts now priced through the June 2025 meeting.

Prime Minister Michel Barnier is set to deliver his first address to the National Assembly in office at 1500CET (0900ET, 1400BST). The political back-and-forth over the summer as President Emmanuel Macron sought to piece together a workable gov't has meant there has been very little in terms of policy detail released. Today's speech is set to lay out a roadmap for his centre-right gov't over the coming months, with Le Monde noting that "Among the highly anticipated themes are public finances and possible tax increases, ecological transition, health, education, security and immigration."

• The most pressing issue is the French budget, with a proposal due next week and the EU expecting a plan for France's debt-reduction programme by month-end. Given the state of French public finances, spending cuts are seen as a given. However, Barnier could outline plans for tax increases, something that risks destabilising his already-shaky coalition further. The parties that form the presidential Ensemble bloc have indicated that they will withdraw support should Barnier raise taxes (levies on large corporations and share buybacks have been mooted).
• In a departure from the long-standing convention (but copying that of his immediate predecessors Gabriel Attal and Elisabeth Borne), Barnier has confirmed that he will not call a confidence vote in his gov't. Such a move is not constitutionally required. The leftist New Popular Front has confirmed it will submit a no-confidence motion this week, but with the far-right Rassemblement National not backing the motion it is set to fail.