US FISCAL: Rising Expenditures Keep Budget Deficit Ballooning
February's Federal budget balance came in almost exactly as expected at $307.0B ($308.0B survey), an increase from $296.3B in the same month of 2024. That brought the cumulative budget deficit through the first 5 months of the fiscal year (starting in Oct) to $1.147T - outpacing easily outpacing the previous year's total to this point of $828B, and exceeding even 2021's post-covid $1.05T for a new 5-month record.
- The wider February total is also despite a pickup in revenues ($296.4B vs $271.1B in Feb 2024), as expenditures maintained their strong recent record ($603.4B vs $567.4B in Feb 2024). February is seasonally one of if not the lowest revenue months of the year.
- Total receipts are up 1.9% Y/Y in the first 5 months of the current fiscal year compared with the same period a year earlier - but outlays are up 13.2% Y/Y.
- One of the categories causing expenditure to pick up is net interest, which came in at $74.2B, boosting the 12-month cumulative total to a fresh record $927B - roughly 3x the amount seen at the recent low in 2021.
- Absent a significant turnaround, the FY 2025 deficit is on pace to exceed the $1.9T projections made by the Congressional Budget Office's in mid-January, and the Office of Management and Budget's made in July 2024. Either way, it's set for an ex-Covid record.
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US: FED Reverse Repo Operation
RRP usage inches up to $99.653B this afternoon from Friday's $95.248B - compares to last Wednesday's $78.788B -- lowest level since mid-April 2021. The number of counterparties rebounds to 41 from 33 prior.
US TSY FUTURES: March'25/June'25 5Y Roll Surge
Tsy quarterly futures roll from March'25 to June'25 gets underway today with decent volume in 5s. Percentage complete remains low, less than 2% across the curve ahead the "First Notice" date on February 28. Current roll details:
- TUH5/TUM5 appr 2,000 from -6.0 to -5.5, -5.75 last
- FVH5/FVM5 appr 84,700 from -3.25 to -2.75, -2.75 last
- TYH5/TYM5 appr 6,700 from -0.25 to +0.25, +0.0 last
- UXYH5/UXYM5 less than 300 from 4.5 to 4.75, 4.75 last
- USH5/USM5 appr 500 from 4.75 to 5.75, 5.25 last
- WNH5/WNM5 less than 100 from 3.5 to 4.5, 4.25 last
- Reminder, March futures won't expire until next month: 10s, 30s and Ultras on March 20, 2s and 5s on March 31. March Tsy options expire February 21.
OPTIONS: Call Condor Buying In Decent Size Monday
Monday's Europe rates/bond options flow included:
- OEH5 117.25/118.25 RR, bought the call for 4.5 in 4k.
- RK5/ERM5 98.0625/98.3125cs spread, bought for 0.25 in 4k.
- ERK5/ERM5 98.0625c calendar, bought for 0.75 in 10k.
- ERK5 97.875/97.9375/98.00/98.0625c condor, bought for 1.5 in 4k
- ERM5 97.875/97.9375/98.00/98.0625c condor, bought for 1.5 in 2.5k.
- ERM5 97.9375/98.00/98.0625c fly vs 97.50p, bought the fly for flat in 10k.
- SFIM5 95.95/96.05/96.15/96.25c condor, bought for 2.5 and 2.75 in 28k total.
