US NATGAS: US-CAN NatGas: Cross Border Flows Dec 26th

• "The Government has announced a five-month freeze to fuel duty rates until September 2026 at which point it states that the five pence cut first introduced in 2022 will be reversed through a staggered approach. From April 2027, the Government has stated that the fuel duty rates will then be uprated annually by RPI."
• Note that a full reversal had been expected here which would have knocked 0.1ppt off of headline CPI from April. We will still see that between April to August but then will see an increase later in the year. This might still help near-term when CPI is high, however, and by not having an increase in April it should have less of an impact in inflation expectations as CPI should be lower when the duty increases.

Long end gilts have reversed the initial rally that followed the early release of the OBR documentation.

• We think questions surrounding ongoing overoptimism in the OBR’s economic growth forecasts, coupled with the long lead time before tweaks to the tax shielding of pensions, have left the market feeling a little underwhelmed.
• Futures trade as low as 90.53, respecting yesterday’s low, before recovering to 90.80. Fresh extension lower would expose the 21 November low (90.28).
• Yields 1bp lower to 4bp higher, curve twist steepens. The flattening move that came alongside the wider than-expected fiscal headroom projections and CGNCR forecast that looked gilt-positive at first glance has been more than reversed. 2s10s and 5s30s to fresh session highs in recent trade but still below recent closing highs at 79.52bp & 145.77bp, respectively.
• 30-Year swap spreads echoing the idea of disappointment, trading 1bp lower than pre-OBR headlines at -82.5bp. The initial gilt rally briefly took the spread above -80bp.

Details of the "mansion tax" or the "High Value Council Tax Surcharge" as it is officially known. Note this raises the GBP400mln the Times reported at the weekend.

"From April 2028, owners of properties identified as being valued at over £2 million by the Valuation Office (in 2026 prices) will be liable for a recurring annual charge which will be additional to existing council tax liability. There will be four price bands with the surcharge rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band, to £7,500 for a property valued in the highest band of £5 million or more, all uprated by CPI inflation each year. This measure is estimated to raise £0.4 billion in 2029-30. The revenues will flow to central government rather than remain with local government, as is the case for standard council tax."