IRELAND: Risks From Potential US Tariffs - Corporate Tax Vulnerability (3/3)
Feb-13 15:05
- To address this fiscal concern, Ireland has set up the Future Ireland Fund (FIF), a long-term savings fund, which is intended to contribute to exchequer expenditures in the 2040s onwards. Currently over E8bln sits in the FIF (E4bln from the National Reserve Fund was transferred and E4bln contributed for 2024), with 0.8% of GDP to be added every year. The government hopes as much as E100bln could reside in the FIF.
- Whilst the establishment of this fund is promising, it was created relatively late. The Economic and Fiscal Outlook 2025 publication from the Department of Finance outlines expectations of the Exchequer Balance to fall into deficit from 2026 at -E0.8bln, and remain in deficit for the foreseeable future (2030 where the estimates end).
- The forecast deficit is not only due to corporation tax receipts anticipated to fall but due to higher expenditure. The Irish government plans to allocate E14.9bln to "voted capital expenditure" (i.e. capital expenditure that needs parliamentary sign-off) to help narrow the infrastructure gap in 2025. This is the highest level ever in cash terms, but similar to 2024 levels when adjusted for inflation. Whilst this should benefit the Irish economy in the long run, in the short term it leaves the fiscal balance more vulnerable.
- Had the Fund been set up earlier, it likely would be better able to cushion the potential fall in receipts and higher expenditure better to increase confidence in the government that the exchequer balance will continue to be in surplus in the years to come.
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EQUITIES: EU Bank put buyer
Jan-14 15:03
SX7E (21st Feb) 145p, bought for 1.50 in 10k.
ECB: Weekly ECB Speak Wrap (Jan 1 – Jan 14)
Jan-14 15:01
Since the turn of the year, ECB speakers have generally re-iterated that the case for further rate cuts is solid. ECB implied rates have nonetheless been dragged higher by USD and GBP counterparts, with OIS now pricing 89bps of cuts through year-end (down from around 115bps on December 31). 25bp cuts are still essentially fully priced through the January and March meetings, but implied odds of a larger 50bp move have been removed.
- Since Jan 1, Stournaras, Villeroy, Lane, Rehn and Vujcic have supported the case for further policy easing, with the hawkish Holzmann unsurprisingly presenting a more cautious view.
- The recent surge in crude oil and natural gas prices may present a fresh upside risk to the inflation outlook, though Executive Board member Cipollone noted on Jan 9 that the “December projections already assume gas prices in 2025 will be 25% higher than the average for 2024”.
- Meanwhile, Lane and Vujcic commented that more progress is still needed on services inflation. For MNI’s recap of the December flash inflation data, see here.
- The ECB projects a consumption-led economic recovery to take hold in 2025, but US trade policy remains a key source of uncertainty. Markets and policymakers await US President-elect Trump’s inauguration on Jan 20 for further developments on that front.
- In the following, we provide a summary of ECB-speak during the first two weeks of 2025: 250114 - Weekly ECB Speak Wrap.pdf
PIPELINE: $2.5B BNG Bank 5Y SOFR Launched
Jan-14 14:55
- Date $MM Issuer (Priced *, Launch #)
- 01/14 $2.5B #BNG Bank 5Y SOFR+47
- 01/14 $2.5B #CADES 5Y SOFR+68, upsized from $2B
- 01/14 $3B KFW +5Y +40
- 01/14 $2B IFC 3Y SOFR+29
- 01/14 $2B CAF 5Y SOFR+82
- 01/14 $Benchmark Blackstone Private Cr Fund 7Y +190a
- 01/14 $Benchmark LifePoint Health 7NC3
- 01/14 $Benchmark Adobe 3Y +50a, 5Y +60a, 10Y +80a
- 01/14 $Benchmark British Colombia 3Y SOFR+45
- 01/14 $Benchmark BFCM 5Y +120a, 5Y SOFR
- 01/14 $Benchmark Hyundai 3Y +100a
