UK FISCAL: OBR FRS: Not a lot new on productivity in the report (1/2)
Jul-08 08:52
- The assumption that debt could rise to "above 270% of GDP by the early 2070s" is a broad reaffirmation of 274% number from the September report baseline
- "A low-productivity variant of our 2024 FRS long-term fiscal projections based on productivity growth of 0.5 per cent (1.0 percentage points below our central scenario) would increase net debt relative to our central projection by over 350 per cent of GDP by 2073-74, reaching 647 per cent of GDP."
- There isn't a lot else on productivity assessments in here - it doesn't appear that the productivity estimates have been updated (the long-term 270%+ number would have changed a lot more if it had) with the following in the report: "Our latest TFP forecast lies at a mid-point between these stronger and weaker periods of growth [extremes of 0.5-2.2% since 2010], reaching 1.1 per cent a year for TFP and 1¼ per cent a year of overall productivity by 2029-30. Over the medium-term, this is more optimistic than most external forecasters. The Bank of England, for example, projects that productivity growth will settle at ¾ per cent over the medium-term."
- There is a paragraph on the latest fiscal changes from the government, with warnings over the recent government U-turns increasing spending:
"The Government’s reforms to fiscal frameworks have reduced some policy-related risks by codifying multi-year spending planning for public services in legislation, and by legislating that fiscal policy announcements costing more than 1 per cent of GDP are accompanied by an economic and fiscal forecast. The decision to fund an increase in defence and security spending from 2.4 to 2.6 per cent of GDP through reductions in overseas aid spending has addressed one major source of upward pressure on spending. But recent policy commitments create new pressures on the public finances, including the reinstatement of winter fuel payments for some pensioners, the reversal of welfare reforms, and the commitment to further increase defence spending to 3.5 per cent of GDP by 2035."
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JGB TECHS: (M5) Rallies Off Lows
Jun-06 22:45
- 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: 139.19 @ 15:53 GMT Jun 06
- 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, 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 TSYS/SUPPLY: MNI UST Issuance Deep Dive: June 2025
Jun-06 21:24
We've just published our UST Issuance Deep Dive - Download Full Report Here
- May’s refunding round saw guidance as well as coupon sizes for the current quarter unchanged.
- The August round (Jul 28-30) could prove more compelling, reflecting both pressure at the long end of the Treasury curve as well as a shifting fiscal outlook amid tariff revenues contrasted with impending tax cuts (not to mention the likelihood of approaching the debt limit at around that time if it’s not lifted).
- Future Coupon Upsizing: We’ve seen some expectations that Treasury could lean against some of those trends in the August refunding, with potential signals if not immediate action on adjusting buybacks or even reducing issuance duration in order to reduce pressure on the long end. MNI’s current expectation is that coupon sizes will only be increased in early 2026. We will update in our next Deep Dive at end-June, with our full refunding preview coming in late July.
- Upcoming issuance: June is set to see $315B in nominal Treasury coupon sales, in addition to $23B in 10Y TIPS and $28B FRN for a total of $366B. Sales for the month start in the coming week, on Tuesday June 10 with $58B of 3Y Note, Wednesday June 11 with $39B of 10Y Note, and Thursday June 12 with $22B of 30Y Bond.
- May Auction Results: Against a backdrop of continued steepening pressure for global sovereign curves, May’s coupon auctions saw strong sales at the short-end/belly contrasted with tails at the long-end.
US FISCAL: Extraordinary Treasury Measures Tick Up As Cash Depletes
Jun-06 20:20
Treasury had $84B in "extraordinary measures" available to keep the government financed as of June 4 per a release Friday. That is up from $68B a week earlier though Treasury has exhausted three-quarters of the total initially available ($362B) when the debt limit impasse began in January.
- Combined with a pullback in Treasury cash ($376B), the total resources available to avert an "x-date" in the summer are down to a total $460B, the lowest since April 10 before the annual tax take accelerated.
- There will be another uptick in Treasury cash late next week/early the following week around the mid-June tax date, but this is likely to be the last major uplift before the summer at which point x-date speculation will pick up if Congress hasn't passed a debt limit increase by then.
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