REAL ESTATE: Property: Week in Review

• EUR/USD: $1.0900-10(E3.0bln), $1.0930-50(E3.0bln), $1.0960-65(E668mln)
• USD/JPY: Y143.00($1.3bln), Y145.00($744mln)
• EUR/GBP: Gbp0.8650-65(E643mln)
• AUD/USD: $0.6165(A$744mln), $0.6285($555mln), $0.6400(A$1.3bln)
• NZD/USD: $0.5600-05(N$724mln)
• USD/CAD: C$1.4395-00($1.5bln)
• USD/CNY: Cny7.3500($912mln), Cny7.4000($1.4bln)

TD Securities recommended longs in 30-Year gilts at 5.62%, targeting a move to 5.10%, with a stop set at 5.90%.

• They note that “rates vol. is heading to unhealthy levels, straining financial conditions. The BoE has already voiced its concern on this move. Markets should not underestimate a possible easing in the form of regulations or verbal easing or even a temporary QT freeze on this move. On every metric, 30-year Gilts are cheap: vs. U.S. Tsys & Bunds, as well as ASW and on the 5s30s curve”.

Key fiscal/economic measures announced by the incoming CDU/CSU/SPD coalition below. These broadly match the announcements seen in local media earlier today. Note that in Germany, an announcement of measures as part of a coalition agreement does not necessarily mean these will be implemented. Overall, the government seems to be planning to make use of the newly increased fiscal headroom:

• Reducing income taxes for small and medium incomes in the middle of the legislative period
• Investment "booster" in the form of amortization of equipment investment of 30% per year for the three years 2025-27
• After this has ended, decreasing the corporation tax in 5 steps by 1pp each starting January 2028 (currently standing at 15% of ~EBT but note that is not the only tax enterprises have to pay in Germany)
• Reduction of electricity taxes to the European minimum, reduce electricity network charges, abolish gas price levy, introduce a "industrial electricity price" for energy-intensive companies
• Make overtime bonuses tax-free, up to E2000/month tax-free labour work during pension, replace the "citizens income" by a "basic income" (compulsory job applications for unemployed persons and tougher sanctions)
• VAT decrease for food in restaurants by 12pp to 7% starting Jan 2026
• Increase of the minimum wage to E15/hour in 2026 (17% increase, agreement rather vague here though)
• Monetary incentives for EV purchases
• Plans to complete debt brake reform this year to "permanently enable additional investment"

Full coalition agreement pdf document available online, link here.