PIPELINE: Corporate Bond Update: $2.25B Citigroup Launched

The top House Democrat super PAC is circulating a memo laying the groundwork for Democrats to hammer Republicans on potential cuts to Medicaid. The success of the campaign may be consequential to the GOP's ability to find sufficient offsets to fund President Trump's tax agenda. 

• The memo states: “While Donald Trump and House Republicans promised to ‘love and cherish’ Medicaid, House Republicans have gone full Matt Bevin, and are planning to make deep cuts to fund $4.5 trillion in tax cuts for Elon Musk and other billionaires,”
• Punchbowl News notes: “Bevin, the former Republican governor of Kentucky, lost reelection to Democrat Andy Beshear in 2019 on the heels of an attempt to overhaul statewide Medicaid benefits. Democrats believe there is a similar opportunity to win seats in deep-red territory by capitalizing on voter anger over GOP entitlement reforms, especially if those funds are used to offset tax cuts.”
• The memo notes: “A clear majority of voters—including Trump voters—oppose House Republicans’ plan to cut Medicaid: “76% of voters have a favorable opinion of Medicaid and 82% see it as an important source of health coverage.
• “78% of Americans disapprove of making major Medicaid cuts, including 67% of Trump voters.
• “66% of voters say they would feel unfavorable about Republicans in Congress if they push for large cuts to Medicaid this year.”

Figure 1: Opinion of Medicare, Trump Voters (Democrat-Affiliated Survey Data)

Source: HART Research 

• RES 4: 1.2811 High Dec 6 
• RES 3: 1.2767 50.0% retracement of the Sep 26 ‘24 - Jan 13 bear leg 
• RES 2: 1.2667 High Dec 19
• RES 1: 1.2635 High Feb 17
• PRICE: 1.2615 @ 16:08 GMT Feb 18
• SUP 1: 1.2466 20-day EMA     
• SUP 2: 1.2333/2249 Low Feb 11 / 3 and a key short-term support
• SUP 3: 1.2161 Low Jan 17 / 20
• SUP 4: 1.2100 Low Jan 10 and the bear trigger   

A bull cycle in GBPUSD remains in play and the pair is holding on to its recent gains. A recent breach of resistance at 1.2550, the Feb 5 high, confirmed a resumption of the current uptrend. Furthermore, 1.2610, 38.2% of the Sep 26 ‘24 - Jan 13 bear leg, has been pierced. A continuation higher would strengthen current conditions and open 1.2767, the 50.0% retracement. Key short-term support is 1.2333, the Feb 11 low.               

• The timely Dallas Fed’s banking conditions survey, collected Feb 4-12, noted that “loan volume continued increasing at a rapid pace in February while loan demand accelerated further.”
• Whilst only a snapshot for one region, it's nevertheless of note with some disagreement on the FOMC as to the level of restrictiveness currently exerted by monetary policy.
• The current period loan demand balance of +30 is up from +11 in the late Dec survey for its highest since May 2022, whilst future loan demand only dipped 3pts to a still elevated +16.
• A net share continue to see tighter credit standards, but with a balance of -10.4 (after -12.5 in late Dec), it poked below the -10.5 in Oct for technically its least since Apr 2022.
• The press release notes that “Loan nonperformance rose across all loan types, while growth in general business activity slowed”. However, we note that the current period NPL ratio at +16 is within recent ranges, which included the Jan 2025 high of +25. What’s more, the balance expecting higher NPLs in the future at +14 was up from two particularly low reports at 4-5 but is stil far lower than the +50 balances seen in 2023.