BOE: VIEW CHANGE: BofA adds a September cut to forecast path

“Today, EFSF, the European Financial Stability Facility has sent a Request for Proposal to a selection of banks from the EFSF/ESM Market Group with regards to an upcoming transaction, subject to market conditions.”

• MNI had been expecting this, we noted in our EGB Issuance, Redemption and Cash Flow Matrix last week (and this morning's daily issuance PDF) that  looked for a second syndication of the year between March and the first half of April.
• We pencil in a transaction on 31 March / 1 April, but don't have a strong conviction on the size / maturity.

The Swedish goods trade surplus was steady in February SEK14.4bln, with January’s reading revised down to SEK14.5bln from SEK15.1bln initial. On a 12-month rolling basis, the surplus rose to SEK72.6bln (vs SEK69.4bln prior), the highest since September.

• Partner-level trade data is only available as of January, so it is difficult to gauge whether any tariff front-running to the US has been at play. Of the threats already made by US President Trump against the EU, Sweden is most sensitive to proposed levies on vehicle exports (in Q3 2024, Swedish vehicle exports to the US accounted for 0.7% of GDP). However, data as of January doesn’t show a material pickup in vehicle exports just yet. 
• The January trade surplus with the US was SEK6.8bln (vs SEK10.4bln prior). The 12-month rolling surplus fell a touch to SEK115.2bln (vs SEK115.5bln prior).
• The 12-month rolling trade deficit with Germany and China widened slightly in January.
• The volume of goods exports rose 4% Y/Y in January, while imports rose 2% Y/Y. 

Ahead of the Spring Statement Citi note that “the initial reaction may be light given the apparent lack of meaningful positioning into the event, but we think it will be hard to find any positives for gilts”.

• The believe that “headroom greater than GBP10lbn likely requires larger unspecified spending cuts that the market will look through; a remit close to consensus likely implies an upward revision on 23 April; and of course, the fiscal position will remain precarious into a likely challenging Budget in the Autumn, including potential revisions to the OBR’s productivity assumptions and further increase in defence spending”.
• They conclude with “despite this, swap spreads have been trading well into today. This could suggest that the bad news is in the price. It is worth nothing, however, that while two of the last four fiscal events have led to richer gilt swap spreads on the day, for all four that has given way to cheapening over the following week on longer-term fiscal worries”.