COMMODITIES: This Week's Sharp Sell-Off in Gold Considered Corrective

PM Sir Keir Starmer is set to deliver a televised speech at around 10:30GMT (05:30ET, 11:30CET). The ostensible subject of the address is welfare reform, but he is expected to use the speech to defend the choices his gov't made in last week's Budget statement. The speech comes at a time when Chancellor of the Exchequer Rachel Reeves is under significant media scrutiny over whether she 'lied' to the public in the run-up to the Budget regarding the state of UK public finances. 

• The Times reports that the PM and Chancellor "misled the Cabinet" in their insistence that there was a larger 'black hole' in the public finances than Office for Budget Responsibility forecasts (seen by Reeves in late October) showed.
• These forecasts, in fact, showed no 'black hole'. Instead, there was an improved fiscal outlook, with GBP4.2bln of fiscal headroom. For financial markets, this would have appeared to be a narrow amount of leeway, in turn reinforcing the chancellor's view that tax rises were necessary in the budget (given backbench opposition to spending cuts) to build out this buffer.
• As noted earlier (see UK FISCAL: Reeves reported for possible "market abuse," ministerial code breach), the main opposition Conservatives have accused Reeves of potential market abuse after delivering a speech viewed as indicating to the public and markets that income tax rises were forthcoming in the budget. 

Peripheral outperformance has been a multi-year theme in the EGB space, with a mix of economic growth, fiscal and sovereign credit rating outperformance driving spread tightening vs. core and semi-core EGB peers.

• Many sell-side desks maintain peripheral spread tightener recommendations, as they expect this outperformance to continue.
• Natixis recommend entering a long SPGB vs. RAGB trade via SPGB 3.25% 30-Apr ‘34 vs. RAGB 2.40% 23-May 34.
• They recommend initiating the trade with a 12-month holding horizon, identifying attractiveness for real-money investors.
• Natixis target a move to 0bp, with a stop set at 20bp.
• They suggest that that the relative fiscal outlook for the next five years has not yet been reflected in spreads. They also highlight that “Austria remains close to recession, with a high deficit and the debt-to-GDP ratio is expected to rise further”.
• On the SPGB side, they write “improving fiscal fundamentals means that the country is likely to exit the Excessive Deficit Procedure soon, while we don’t expect political risk to stop the Bono outperformance”.

BNP (18/12/26) 60^, trades for 19.67 in 2.1k.