OIL OPTIONS: WTI Mar25 Option Expiry Today

The French YTD general government budget deficit widened to E172.5bln in November. The November YTD deficit stands at 105.7% of the 2024 forecast deficit by the French Ministry of Finance (vs 114% in Jan-Nov of 2023's outturn).

• Note that November usually marks the low point of the year with the month of December usually seeing a surplus. The forecast for the whole year of 2024 is E163.2bln, and this print is a notably smaller deficit than the Jan-Nov 2023 period (E198.0bln).
• The balance of special accounts' deteriorated to -E22.5bln (vs -10.3bln in October 2024, and -E21.9bln in November 2023), leaving the current YTD balance more than 4 times where it is forecast to stand between Jan-Dec 2024 (at -E5.6bln), though this is in line with seasonal trends, with the account usually improving in December.
• YTD revenue rose to E312.0bln in November 2024 vs E297.1bln in Jan-Nov 2023, taking the YTD receipts to 90% of forecast (compared to 84% in Nov 2023).
  • This is driven largely by a timing, rather than a fundamental issue. Non-tax revenues remain significantly above 2023 YTD levels recording E19.7bln in November and 83% of 2024 total forecast (vs E10.9bln in Jan-Nov 2023 and 44% of 2023 total). This is because of an EU RRF payment was received earlier in the year compared to 2023 (June rather than December).
  • Tax revenues YTD are marginally above Jan-Nov 2023 receipts at E285.4bln (88% of 2024 forecast; vs E280.0bln in Nov 2023 and 87% of 2023 total).
• YTD total expenditure was E462.1bln (vs E473.2bln YTD in November 2023), this represents 91% of the 2024 total expenditure forecast forecast, broadly in line with where it stood in November last year (90% of total).

Commerzbank note that “repo specialness continues to erode out of year-end, but exclusively due to the rich, seasoned Bunds. Recent issues and GC remain floored around depo, suggesting that the collateral floor continues to hold.”

• “Swap spreads stay tense as the renewed pressure on (ultra-)longs offsets the collateral-driven resilience in Schatz-spreads. As fiscal fears continue to dominate, U.S. Tsy and Gilt spread-structures signal further downside even if the collateral floor remains in place. We therefore stay short (ultra-)long Bund ASW spreads outright and vs. the curve, as well as 30y OAT spreads.”
• “As the specialness differential between seasoned, low-free-float Bunds and high-free-float ones continues to compress we see value in switching out of seasoned, rich DBRs into the active peers. EGB-spreads should continue to consolidate as fiscal fears stays in focus.”

French final December HICP inflation was unrevised from the flash print on a rounded basis at 1.8% Y/Y (vs 1.68% in November) and 0.2% M/M (vs -0.15% prior). On a unrounded basis HICP inflation was 1.75% Y/Y, 1 hundredth softer than the flash reading. CPI inflation was also unrevised from flash at 1.3%. On an unrounded basis, CPI was 3 hundredths softer than the flash estimate at 1.32% Y/Y. 

• Core CPI softened to 1.3% Y/Y (from 1.5% in November).
• Services was revised down 1 tenth from flash to 2.2% Y/Y (2.3% in Nov) while core services also softened to 2.6%  (vs 2.8% in Nov - there is no flash for this series). The slowdown in services was in part due to prices of communication services falling 14.7%  (vs -12.2% prior).
• The broad "manufactured products" component was unrevised from the flash print at -0.4% Y/Y (vs -0.3% prior). Core manufactured products fell at a steeper rate 0.4% Y/Y (from -0.2% in Nov).
• The softening in services and manufactured products is offset by energy rebounding between November and December; it was unrevised from flash at 1.2% Y/Y (vs -0.7% in Nov).
• INSEE's seasonally adjusted CPI series highlights momentum rebounding after having eased for the previous few months. CPI rose 0.4% M/M seasonally adjusted (SA), after a flat reading in November. The 3m/3m SA annualised rate rose 0.18% in December (vs a fall of 0.71 in Nov), and the 3m annualised rate rose a solid 2.63% (from -1.45% in November) - the firmest since August 2024.
• There was a marginal decrease in the proportion of subcomponents with annual inflation rates above 2% in December (34% vs 35% prior), with the proportion of components with annual inflation rates above 6% also falling marginally to 10% from 11% in November.