ZAR: Rand Edges Lower, Budget Talks Set To Resume Monday
Feb-28 09:30
USD/ZAR gains for the second consecutive day, with the greenback ticking higher this morning. The pair last deals at 18.4871, around 250 pips higher on the session, with bulls looking for a move towards Jan 13 high of 19.2296. Bears keep an eye on Jan 24 low of 18.3022.
- Market participants are eyeing the resumption of cabinet talks on the delayed 2025 Budget. News24 reported that FinMin Godongwana will propose a downsized 0.75pp VAT hike and a payment "holiday" from the Government Employees Pension Fund on Monday, while the Democratic Alliance (DA) continues to push back against any tax hikes.
- Minister in the Presidency Khumbudzo Ntshavheni said that the revised March 12 date for the delivery of the 2025 Budget is "cast in stone" and confirmed that the cabinet will hold a special meeting on March 3 to review the Treasury's proposals.
- SAGB yields have ticked higher across the curve. South Africa's breakeven inflation rates sit at 4.60% and 5.62% across the 5--year and 10-year tenors respectively.
- The aggregate BBG Commodity Index has shed 0.4% and the precious metals subindex sits 0.9% lower on the session. Gold changes hands ~$15.7/oz. lower at typing.
- South Africa's trade balance and budget balance will hit the wires at 12:00GMT/14:00SAST.
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BONDS: Looking Through Sell Off In Crude
Jan-29 09:28
No reaction in core global FI as crude oil benchmarks fall by ~$1 over a 30-minute window.
- Our commodities team doesn’t see any driver for the move in crude, with an uptick in the broader USD much more measured over the same timeframe, so that lacks explanatory power.
- Brent through yesterday’s low but within the multi-session range. Yesterday’s low in WTI holds.
EURIBOR OPTIONS: Large Call Spread trades for more
Jan-29 09:22
ERM5 98.12/98.25cs, bought for 0.5 in 55k Total, desks suggest that this is a cover.
GERMAN AUCTION PREVIEW: 2.50% Feb-35 Bund
Jan-29 09:14
This morning, Germany will hold its second 10-Bund auction of the year. On offer will be E4.5bln of the 2.50% Feb-35 Bund.
- The size is a step down from the E5.0bln seen at the last auction of this issue in January (when the Bund was launched); however, the size is consistent with recent Bund re-opens.
- Recent auctions in the German 10y segment have passed smoothly, with solid bid-to-covers (in a 1.83x to 2.40x range since July), bid-to-offers (1.52x to 1.93x range since July) and the low prices above the secondary market mid-prices throughout 2024.
- For the last 2.50% Feb-35 Bund auction on 8 January, the bid-to-cover stood at 2.12x, while the bid-to-offer came in at 1.60x.
- Bund positioning currently appears flat, and seems to have been characterized by a reduction of longs during the last week. See our Europe Positioning Indicator here: https://media.marketnews.com/MNI_PI_28012025_133af9ff97.pdf
- The political situation in Germany is characterized by some uncertainty at the moment amid snap elections being scheduled for February 23. However, the mainstream parties are expected to be able to form a functioning government as of now - so we don't expect an impact on today's Bund auction from that.
- The next German auction will be E5bln of the 2.40% Apr-30 Bobl (ISIN: DE000BU25042) on February 11, while the 2.50% Feb-35 Bund will be reopened next on February 19. Note that we also pencil in the possibility of a 30-year Bund auction next week.
- Timing: Results will be available shortly after the bidding window closes at 10:30GMT / 11:30CET.
