OAT: Spread To Bunds Widens 1bp On Fresh Snap Election Speculation
The 10-year OAT/Bund spread widened after BBG reported that President Macron is exploring the idea of a snap election as soon as the fall.
- The spread widened 2bps to 78bps on the initial headline before moderating back to 77bps at typing.
- From the piece:
- "Emmanuel Macron is exploring the possibility of dissolving parliament and holding snap elections as soon as this fall as a return to international prominence helps boost the French president’s popularity at home".
- "The discussions are merely consultative and no decision has been made".
- "Among the options being considered is waiting until next year before dissolving parliament to hold legislative elections at the same time as a planned municipal vote in 2026, said one of the people, who spoke on the condition of anonymity. The person told him it was a bad idea".
- French political risks have taken somewhat of a backseat in recent weeks, superseded by German fiscal and US tariff developments.
- Last week, Finance Minister Lombard noted that France will need to find an additional E40bln of savings to meet its 2026 budget target of 4.6% GDP. These headlines were not major market movers.
- Earlier, we highlighted that Goldman Sachs think “the more important test [for OATs] will come in the summer when the government formalises the budget proposal and negotiations with other parties start in earnest against a backdrop where elections are possible again”.
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CANADA PM CARNEY TO MEET GOVERNOR GENERAL AT NOON
- CANADA PM CARNEY TO MEET GOVERNOR GENERAL AT NOON
- CARNEY EXPECTED TO SEEK ELECTION
US TSYS: Available "Extraordinary Measures" Pick Up Slightly From Lows
Treasury has $163B of "extraordinary measures" remaining for authorities to use to fend off hitting the debt limit as of March 19, per the latest release of Treasury data. That's up from $86B on Mar 17 and a low of $34B on Feb 24.
- That's a little under half of the $377B in measures available to Treasury, with most of the amount remaining ($143B) coming from the so-called "G Fund".
- This headroom is in addition to $416B in cash left in the TGA, at last count.
- We haven't seen any changes recently to "x-dates" by when Treasury will run out of cash until the debt limit is lifted.
- Consensus still centers around late July/early August, but much will depend on April's major mid-month tax take. Treasury wrote to Congress last week that they would be able to provide an update on the x-date in the first half of May, after the conclusion of tax season.
USDCAD TECHS: Short-Term Outlook Remains Bullish
- RES 4: 1.4793 High Feb 3 and key resistance
- RES 3: 1.4700 Round number resistance
- RES 2: 1.4641 76.4% retracement of the Feb 3 - 14 bear leg
- RES 1: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- PRICE: 1.4345 @ 16:27 GMT Mar 21
- SUP 1: 1.4242 Low Mar 6 and a key near-term support
- SUP 2: 1.4151/4107 Low Feb 14 / 50.0% of Sep 25 - Feb 3 bull run
- SUP 3: 1.4011 Low Dec 5 ‘24
- SUP 4: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
USDCAD is trading closer to its recent lows. The bull cycle that started Feb 14 remains intact and moving average studies remain in a bull-mode position, highlighting a dominant uptrend. Note that the latest pullback has exposed a near-term key support at 1.4242, the Mar 6 low. Clearance of this level would undermine the bull theme and instead highlight potential for a test of 1.4151, the Feb 14 low and a bear trigger. The bull trigger is 1.4543, the Mar 4 high.
