EM CEEMEA CREDIT: Saudi Telecom: Agreement with AST for Space-based Connectivity

For the full report click here.

• We are now less than two months away from the UK Budget (26 November), an event that could have huge significance on many levels for markets.
• We look at the impacts of increasing VAT - on CPI, fiscal revenue and monetary policy.
• We also look at the expected revenue from raising income tax or employees national insurance (NICs).
• The measures could have significant long-term implications on UK growth (including both consumption and incentives for companies to invest), monetary policy, long-term fiscal sustainability as well as the amount of gilts that will need to be issued in coming years.
• Media reports suggest that the Treasury expects around a GBP30bln fiscal hole that will need to be filled. And these reports came out before the disappointing August data.

• MNI: US NAR AUG PENDING HOME SALES INDEX 74.7 V 71.8 IN JUL
• US NAR AUG PENDING HOME SALES +4.0% MOM; +3.8% YOY

Gilt futures have operated in a narrow 21-tick range since the opening gap higher, with little in the way of meaningful domestic catalysts noted.

• The contract traded as high as 90.85. Initial support and resistance located at 90.26 & 91.28, respectively.
• Yields 2.5-4bp lower, curve flatter. 2s10s and 5s30s are 5bp and 2bp off their respective September pullback closing lows.
• Chancellor Reeves seemingly ruled out the imposition of a wealth tax and pushed back against suggestions that the government would stray from its manifesto pledge of not altering the “big 3” taxes (more on that to follow imminently). However, she didn’t outline any steps that she will take to fix public finances.
• The UK’s ongoing fiscal deterioration is well-documented, limiting gilt rallies and keeping bearish/steepener technical setups in place.
• BoE Governor Ramsden seemed to reaffirm his position as the most dovish MPC member that did not vote for further easing earlier this month.
• With the market pricing just 4.5bp of cuts through year-end we continue to suggest that the odds of a Q4 BoE rate cut are underpriced (albeit with such a move likely needing support from Bailey, Ramsden & Breeden, as well as dovish dissenters Dhingra & Taylor).
• We will hear from Deputy Governor Breeden tomorrow.