ZAR: Rand Steadies After Taking Hit From Untabled Budget
Spot USD/ZAR has stabilised after yesterday's sell-off driven by domestic turmoil surrounding the postponement of the 2025 Budget Speech. The pair last deals at 18.5061, a tad lower on the session, with bears looking for a dip through Jan 24/Feb 14 lows of 18.3022/18.2995. On the flip side, bulls look for gains towards Jan 13 high of 19.2296.
- The unexpected delay to the delivery of the 2025 Budget (see the text of the untabled speech here) exposed rifts in the government of national unity (GNU), but most analysts seemed positive about the prospect of coalition parties ironing out their differences ahead of the planned re-tabling of the spending plan on March 12. The key bone of contention was Finance Minister Godongwana's proposal to increase the VAT rate by 2pp to 17%.
- SAGB yields have ticked higher across the curve, South Africa's 5-year and 10-year breakeven inflation rates sit at 4.69% and 5.75% respectively.
- The composite BBG Commodity Index has added 0.3%, with the precious metals subindex last seen 1.3% higher, as gold trades ~$19.3/oz. better off.
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GERMAN DATA: ZEW Headline Expectations Fall in January
The German ZEW expectations index fell to 10.3 in January, compared to a consensus estimate of 15.1, and December's 15.7, indicating a broad stalling at a relatively low level. The current situation index meanwhile ticked up a bit, to -90.4, outperforming consensus of -93.1 but remains bleak.
- A wider update to German sentiment will follow later this week with the January flash PMIs, and Monday's IFO Business Climate.
- The ZEW index is based on a survey of "experts from banks, insurance companies and financial departments of selected corporations [which] have been interviewed about their assessments and forecasts for important international financial market data" - so the index can exhibit elevated levels of correlation with German stock indices as the DAX.
EURIBOR: EURIBOR FIX - 21/01/24
EURIBOR FIX - EMMI/Bloomberg
- EUR001W 2.9090 -0.0120
- EUR001M 2.7740 -0.0110
- EUR003M 2.6810 0.0040
- EUR006M 2.6060 -0.0130
- EUR012M 2.4890 0.0060
US TSY FUTURES: TU/TY Flattener Blocked
Latest block trades lodged at 09:39:07 London/04:39:07 NY:
- TUH5 5,597 lots blocked at 102-24+.
- TYH5 2,592 lots blocked at 108-25+.
- Would guess a curve flattener given the TY leg traded further through the offer than the TU leg and the 2s7s spread has flattened ~1bp over the last 30 minutes.
- 2s7s now ~12bp off the early '25 closing high, last 21.6bp.
- Looks slightly mis-weighted compared to the CMEs recommended 2:1 ratio, with a bias towards the TU leg.
Fig. 1: US. 2-/7-Year Tsy Yield Curve (bp)
Source: MNI - Market News/Bloomberg
