ITALY: Econ Min Commits To Spending 2% Of GDP On Defence 'This Year'
Speaking to a joint Chamber and Senate committee examining the 2025 Public Finance Document (live stream in Italian here), Economy Minister Giancarlo Giorgetti says Italy will meet NATO's defence spending floor of 2% of GDP 'this year'. NATO estimates Italy's defence spending at 1.49% of GDP in 2024, below the 2% threshold. Bloomberg reported last week that "[Italy] will reach that target by calculating other accessory elements that are related to national security, such as expenditure on its coast guard,"
- The commitment to an increase in spending comes after ructions within the tripartite governing coalition regarding defence expenditure. As MNI Policy wrote on 24 March (see 'MNI: Defence Spending Deepens Italian Government Fractures'), "Deputy Prime Minister Matteo Salvini is laying the groundwork to withdraw his party, the League, from Meloni’s coalition if opposition to boosting defence grows, a source close to him said."
- The article notes, "Salvini wants to position himself as the first to capitalise on potential public discontent over militarisation, the source said, adding that the deputy prime minister shared many views with U.S. Vice President J.D. Vance."
- However, Vance, who visits Rome this weekend with his family, has also made clear his views that European countries must 'pay their way' on defence. Indeed, the Trump administration has talked of 5% being a new NATO floor for defence spending, while European officials have increasingly come to see 3% as a minimum level that will avoid the worst of the White House's scorn on the topic.
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US TSYS: Early SOFR/Treasury Option Roundup
Option desks mixed SOFR & Treasury option flow overnight, lighter volumes so far, April Tsy options expire Friday. Underlying futures hold to narrow range, curves recovering slightly from Monday's flattening. Projected rate cuts through mid-2025 largely steady vs. late Monday levels (*) as follows: Mar'25 steady at -.2bp, May'25 steady at -6bp, Jun'25 at -19.7bp (-19.5bp), Jul'25 at -28.7bp (-28.5bp).
- SOFR Options:
- 4,000 0QH6 97.00/97.50/98.00/98.50 call condors ref 96.385
- 3,000 SFRM5 95.62/95.75/95.81/95.87 broken put condors
- Treasury Options: (April options expire Friday)
- over 5,100 TYJ5 111 calls, 11 last (2k vs Wed/wkly 10Y 111 calls)
- over 2,000 TYJ5 111.25/Wed/wkly 111.25 call spds call spd
- 1,000 Wed/wkly 10Y 111/111.25/111.5 call flys ref 110-20.5
US: Senate GOP Eyes Talks w/Parliamentarian To Determine Reconcilliation Rules
Senate Budget Committee Republicans will meet the Senate Parliamentarian in the coming weeks for a preliminary assessment on using a “current policy baseline” to cost making permanent Trump’s 2017 tax cuts (TCJA) at $0. Without the Parliamentarian’s approval, the GOP 'megabill' will be ineligible for reconciliation - the procedure to bypass the Senate filibuster.
- The move is untested in reconciliation but crucial to President Trump’s expansive tax agenda. Using the CBO's preferred “current law baseline”, TCJA renewal will cost ~USD$4.5 trillion, leaving little headroom for eliminating taxes on tipped earnings/social security payments/overtime pay while keeping safety net programmes like Medicaid intact.
- Punchbowl notes that Parliamentarian Elizabeth MacDonough, “won’t give ironclad rulings at this stage [but the GOP] can get an informal sense of how she views different options.”
- The Hill reports that Senators Ron Johnson (R-WI) and Steve Daines (R-MT) confirmed that Trump is on board with the "current policy" strategy. However House Ways and Means chair Jason Smith (R-MO) and Budget chair Jodey Arrington (R-TX) said in a statement: “A handful of fiscal conservatives in the House have expressed reservations ... calling it a gimmick that obscures the deficit impact of the reconciliation bill,”
- House Speaker Mike Johnson (R-LA) is eying a vote on the reconciliation package by Easter, leaving little time to draft the complex package and whip support. As always, Johnson will face an unruly conference. In addition to concerns among fiscal conservatives, defence hawks are calling for a steep increase in defence spending to cover shortfalls from short-term funding bills and moderates are calling for Medicaid protection.
ESM ISSUANCE: 6-Month ESM-Bill
| Type | 6-month bills |
| Maturity | Sep 18, 2025 |
| Amount | E1.097bln |
| Target | E1.1bln |
| Previous | E1.099bln |
| Avg yield | 2.278% |
| Previous | 2.339% |
| Bid-to-cover | 2.41x |
| Previous | 3.53x |
| Previous date | Feb 18, 2025 |
