EM CEEMEA CREDIT: PIF (PIFKSA): Final Terms $ 10Y Sukuk

In a statement, HM Treasury has confirmed that Chancellor of the Exchequer Rachel Reeves has asked the Office for Budget Responsibility to prepare an economic and fiscal forecast that she will deliver as the 'Spring Forecast' to the House of Commons on Tuesday, 3 March 2026. 

• The statement says "the Spring forecast will not make an assessment of the government’s performance against the fiscal mandate and will instead provide an interim update on the economy and public finances. The government will respond to the March forecast through a statement to Parliament, in line with the government’s commitment to deliver one major fiscal event a year at the Budget."
• Despite the pledge of only one major fiscal event a year, Reeves was forced into policy announcements in the 2025 Spring Statement due to the UK's worsening fiscal landscape. A number of the spending cuts announced were reversed before implementation due to backbench Labour MP opposition, in turn pushing Reeves into significant tax increases in November's Budget statement. 

• Financing needs for 2026 total E24.677bln (E8.871bln from MT/LT redemptions, E5.200bln interest on debt, E8.790bln of early repayments (including T-bill stock reduction), E6.739bln from other cash requirements (RRF loans, capital increases etc). This is partially offset by a projected primary surplus of E6.510bln.
• Financing sources:
  • GGB issuance E8.000bln (E8.0bln 2025 plan, E6.2bln executed).
  • Other financing sources (NGEU, EIB, CEB, etc.) E4.200bln
  • Proceeds from equity and investment fund shares E618mln
  • Decrease in cash reserves: E11.859bln
• Three GGB auctions planned for H1, on Feb 11, Apr 15 and Jun 17. All re-openings.
• T-bill gross target appears unconfirmed. 12 auctions planned for H1.
• The full plan can be found here (link)

Prime Minister Sébastien Lecornu continues to hold meetings with leaders of political groups in an effort to find accord on moving forward with a state budget for 2026. He is currently holding talks with leaders from the French Communist Party after meeting with leaders of centre-left Socialist Party (PS) and those in the centrist bloc (Renaissance, MoDem, Horizons, LIOT) earlier. Lecornu will next meet with leaders from the left-wing environmentalist Ecologists, then the conservative Les Républicains. 

• After a joint committee from the Senate and National Assembly failed to reach an agreement on the draft budget on 19 December, Lecornu faces the choice of introducing a special law that would allow for tax raising and government spending to continue into 2026 based on existing fiscal legislation, or forcing through the 2026 budget without parliamentary approval using Article 49.3 of the Constitution (risking a censure vote in parliament).
• Under deadlines set by Article 47 of the Constitution, Lecornu has until midnight on 23 December to either pass a budget, pass the special law, or utilise Art. 49.3 to force the budget through.
• Once the party consultations are concluded, a meeting of the Council of Ministers will take place in the presence of President Emmanuel Macron at ~1930CET (1330ET, 1830GMT). It is at this point that Lecornu could present the special bill to the cabinet.
• If Lecornu pursues this path, Roland Lescure, Minister of the Economy and Public Accounts, and Amélie de Montchalin, Minister in charge of Public Accounts, are expected to speak in front of the National Assembly's Finance Committee in relation to the bill at ~2130CET (1530ET, 2030GMT) with the view of holding a vote this evening, before the Senate gives its approval tomorrow.