US LABOR MARKET: Trump Acknowledges Industry Strains From Immigration Policies

Tuesday's Europe rates/bond options flow included: 

• ERN5 98.18/98.37/98.50 broken c fly, sold at 3 in 3k
• ERU5 98.50/98.75cs, bought for 1 in 7k
• ERU5 97.87/98.00cs, sold at 9.5 in 10k
• ERU5 98.37/98.50/98.62c fly, bought for 1 and 1.25 in 8k
• ERZ5 98.37/98.50cs, bought for 2.5 in 17.5k (ref 98.18, 8% del)
• SFIZ5 96.40/96.80 call spread vs. 96.00 puts paper paid 2 on 5K, buying the call spread

• Tax revenues on the federal, state and municipal level for the years 2025 to 2029 inclusive will increase at a far slower pace than previously expected, according to Handelsblatt government sources. Finance minster Klingbeil is scheduled to announce these estimates on Thursday.
• "Their draft estimates indicate that the state as a whole will take in a high double-digit billion amount less [in tax revenues] by 2029 than predicted in the forecast in the fall", when E941.6bln of revenues were predicted for 2025.
• The projections will be revised following the government's recently updated economic outlook (lowered by 0.3pp to 0.0% for 2025; 'Government 2025 Forecast Downwardly Revised, Mirroring Institutes - HB' MNI, Apr 22).
• Lower tax revenues will likely be less detrimental than before for the new government given the now loosened debt brake (a reminder that the old 'traffic light' government ultimately fell apart on the back of a budget gap).

• Employers on the German Minimum Wage Commission objected to a minimum wage increase to E15/hr by 2026 according to a FAZ interview yesterday. The increase is mentioned loosely in the CDU/CSU/SPD coalition agreement, with the discussion was fuelled by public comments from new employment minister Bas (SPD).
• Some senior CDU politicians have previously pushed back on firming the commitment for reaching the E15/hr goal by 2026, and have flagged the responsibility of the independent Minimum Wage Commission in this regard. The Minimum Wage Commission officially examines in an overall assessment which level of the minimum wage is suitable to contribute to an appropriate protection of employees, to enable fair and functioning competitive conditions and not to jeopardize employment.
• While the commentary does not necessarily take a minimum wage rise off the table, in our view, it diminishes the chances of an increase to E15/hour by 2026 (which would equal a 17% jump from the current E12.82/hour) - especially given the mentioned prior pushback from parts of the new coalition.
• To put the figures into context, in April 2024 (latest Destatis figures available), 3.2mln workers in Germany (7% of total employment) had an hourly wage of E12-13/hour whilst a further 5.1mln workers in Germany (another 11%) earned between E13 and E15/hour - these would all be impacted by an increase to E15/h.