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• Along with the Bundesbank proposal from earlier, the German Finance ministry has also put out a press statement highlighting the current status of a debt brake reform proposal by its own enacted commission. The statement does not contain too many details, mainly mentioning a Q1'26 final report publication as well as the creation of 4 working groups within the commission, hinting at where the focus of their proposal may lie:
  • 1) Sustainability of investment and growth, sustainability of public finances
  • 2) Compatibility with EU fiscal rules
  • 3) Exemption for defense-related expenditure, transitional arrangements following an exceptional emergency situation, repayment requirements, and cyclical adjustment
  • 4) Monitoring / limitation of public debt
• Again, keep in mind that any constitutional amendments need a 2/3rds majority in Bundestag, which would be subject to approval from AfD / die Linke in the current legislative period.

Bund futures saw a fleeting 15-tick knee-jerk lower following the release of the Bundesbank’s debt brake proposal. However, the move quickly faded, with RXZ5 back at 129.23 (+10 ticks today).

• The initial reaction may have been in response to the Bundesbank’s view that “the current rules in the Constitutional Law to be suitable for reliably securing sound public finances”. The proposal itself would represent a fiscal tightening versus current rules if implemented.
• Over 50k lots went through in the 5 minutes following 1500GMT, easily the healthiest sequential volumes across the last 7 sessions. Until that flurry of activity, cumulative volumes had been tracking below recent averages, with today’s US holiday likely playing a role.
• Today’s modest upside in Bunds has mostly been spillover from today’s UK and US labour market data. Resistance at the 20-day EMA (129.31 today) is untested, meaning a short-term bear cycle remains intact.
• Tomorrow’s calendar includes final October inflation and 30-year Bund supply.

• Ex-BOE economist Michael McMahon tells MNI about the Bank's progress implementing Bernanke Review recommendations -- On MNI Policy MainWire now, for more details please contact sales@marketnews.com